Q.Explain the following policy conditions:

These four conditions all deal with what happens when premiums are paid late, stopped, or the policyholder needs money out early.

1. Days of grace. Premiums fall due on fixed dates, but the policyholder is allowed a grace period after the due date (commonly about a month for yearly/half-yearly premiums, a fortnight for monthly) to pay without penalty. A claim arising within the days of grace is still paid.
2. Lapse and revival.

• Lapse — if the premium is not paid even within the days of grace, the policy lapses and the cover stops. A policy that lapses after running only a short time may lose all value.
• Revival — a lapsed policy can usually be revived within a stated period by paying all arrear premiums with interest and, if required, giving fresh proof of good health; revival restores the full benefits of the original policy.

(iii) Paid-up value. Once a policy has run for a minimum qualifying period and premiums then stop, it need not lapse totally; it becomes a paid-up policy for a reduced sum assured, worked out from the proportion of premiums actually paid. No further premium is due, and the reduced sum is paid on death or maturity. …

Students often mix up paid-up value (policy continues for a reduced sum, no cash now) with surrender value (policy ends, cash paid now). Also, a cla …