5 Reasons Why Term Insurance Renewal Is Important?
What Is Term Insurance?
We are prone to unforeseen risks that may sometimes occur without warning. To mitigate risks, you could plan and take suitable measures, such as saving and investing your funds in the right avenues to protect against financial pitfalls.
Insurance is an avenue that financially covers policyholders or their nominees against possible losses due to unforeseen circumstances. Term insurance protects the future of the policyholder’s family in case of their untimely demise.
The ethos of a term plan is to compensate nominee/s for the loss of the insured person’s earning capacity after their demise. The policyholder pays a premium in exchange for the benefits offered by the term plan. You can pay the premium for a life term plan monthly, quarterly, half-yearly, or annually.
Term insurance plans must be renewed so that the policy benefits are continued. Timely renewals ensure you do not face any difficulties during claims.. Insurers have also made it easier to purchase and renew their term insurance online.
If you are looking to buy online term insurance, you could check out Tata AIA term insurance.
5 Reasons Why Term Insurance Renewal Is Important
If the premium payment for a term insurance plan is missed, there is a grace period of roughly 30 days with all insurance providers in which you can pay the premium, and the policy can be reinstated. Post the grace period, the life term plan goes into the lapsed stage.
If your term plan has lapsed, you stand to lose or face a reduction in the policy benefits depending on the type of policy chosen and the insurer. It is good practice to check the terms and conditions of your term insurance online so that you are well-informed about your policy.
The following reasons are why term insurance renewals are essential:
- Discontinuation or reduction in policy benefits
If your term insurance policy goes into the lapse stage due to non-payment of premium, you stand to lose the death benefit and any other additional benefits that you may have opted for with your policy. Add-on benefits such as critical illness cover, personal accident cover, or disablement cover may cease if your policy lapses. Some insurance companies do reinstate lapsed term plans, but it varies from insurer to insurer. You may also need to pay an interest amount to have your insurance policy reinstated, depending on the terms and conditions of the insurance provider.
- Medical tests and KYC may have to be furnished again
If you are renewing your policies on time, all you must do is pay the premium amount. It does not matter how good your health history is because the insurance provider must honour the renewal clause. However, if the life term plan lapses and cannot be reinstated, the process will be akin to purchasing a new policy. You may have to submit your KYC documents and undergo a medical exam again.
- Claim filing
It is essential to renew your policy within the given time frame because if your renewal is missed and the policy lapses, it may not be possible to file a claim with the insurance company. This defeats the purpose of purchasing a term plan in the first place. The beneficiaries of the life term plan will not get the sum assured in case of any eventuality. It is advisable to stay updated with renewal due dates, and facilities for online term insurance payments add convenience to secure your family’s future.
- The premium amount and sum assured
The premium stays constant when you renew your policy, i.e., you pay the same amount paid when you purchased the term plan. Not renewing your term insurance on time can lead to a hike in your premium amount. Various reasons, including an increase in age and medical history changes, can lead to a bigger premium size for the same policies.
Renewing your policy on time ensures that you don’t have to incur any increase in premium amounts or additional charges for the term plan. In some cases, the sum assured may also decrease in case of a decrease in income.
- Tax benefits
Besides securing the future of your loved ones, term insurance plans have another benefit, tax exemption. Term life plans in India are exempt from tax up to INR 1,50,000 under Section 80C of the Income Tax Act.
You can claim additional tax benefits with add-on covers such as critical illness cover, which is exempt up to INR 25,000 under Section 80D of the Income Tax Act. Renewing your term plan on time ensures that you continue to enjoy tax benefits. In case your policy lapses, the tax benefits also discontinue. With fiscal policies changing every year, it’s likely you may not enjoy the same tax benefits that you did before skipping your renewals.
What Do You Lose When You Do Not Renew?
Term insurance plans have become essential currently as they safeguard our loved ones in the event of an unfortunate circumstance. You can buy and compare the premium for term insurance online and choose the policy that best suits your needs. Renewing your life term plan is as important as purchasing a policy in the first place because it makes sure that you continue to reap the same benefits of the policy during the time of purchase.
Missing out on policy renewals can adversely affect the benefits you enjoy and lead to your term plan’s termination. Reinstating your policy may require you to pay interest, charges, and higher premiums. Tax benefits might be affected, and most importantly, you lose the ability to file claims which was the main purpose of the life term plan.
It is essential to continue your term insurance coverage without interruption. Insurance companies remind customers about renewal dates of their term insurance online as well as offline. As policyholders, it is prudent to stay up to date on renewal dates and make payments. Payments today are hassle-free and can be made online for term insurance.
In case you are unable to pay the premium of your term plan. It is possible to ask the insurance company for an extension in the grace period, which can be approved without affecting your policy benefits. It is always beneficial to renew your term insurance policy to prevent ambiguity about your coverages and for the continued safeguard of your loved ones.