Our lives are full of uncertainties, and no amount of planning can keep us safe and secure. However, despite knowing the fact, we all implement different methods and techniques to protect ourselves and our loved ones and minimize the risk. One such method most of us adopt is, taking a term insurance policy, a type of life insurance policy.
It is one of the finest life insurance products available in the market, the term insurance plan is a pure life insurance product that offers maximum financial benefit at a lower cost. It is specifically designed to financially protect one's family in case of the death of the insured, and they are simple too. Apart from minimum documentation, just timely payments of premiums will help you to provide a continued financial safety net around your family.
A failure in the renewal of a term insurance policy has a very damaging effect. It not only lapses but, your family also stands at a greater risk of financial loss at the time of the insured person’s death.
Let's check out why you should not fail to renew your term insurance policy timely.
As a responsible individual, there should be no laxness when it comes to renewal of life insurance policies, including a term insurance plan. It is as equally important as buying because failure to renew will cause your insurance to lapse, and you will no longer be able to claim any benefit.
And, not renewing your term insurance policy has a lot of disadvantages than any of its advantage. The following points highlight the difficulties associated:
Letting your term insurance plan lapse through non-renewal defeats the whole purpose of buying the term insurance policy in the first place. In simple words, no active policy-no coverage.
In the case of the sudden demise of the insured, surviving dependents or family members will not receive any financial benefits. Similarly, in case of a diagnosis of any major disease, apart from bearing the enormous medical expense, your family only gets into deep financial liabilities.
Thus renewing your term insurance plan within the due date will not only keep you protected but also secure the financial future of your loved ones.
While purchasing a term insurance plan, the insurer takes into many factors into consideration for the determination of the premium amount. This includes your age, gender, weight, medical history, lifestyle, and total coverage.
For example, those who have taken a policy at a younger age or with no history of any major medical ailments are considered low-risk individuals and get the benefit of a lower premium.
In case your policy gets lapse due to non-renewal, then the insured will not only lose the premium benefits but also lose the low-risk tag. But, not renewing your policy or taking the policy at a later stage will include paying the higher premium amount and also need to undergo mandatory medical tests, which involves high costs.
The timely renewal of term insurance plans is fundamental in the event that you are detected with a major ailment just before renewal. In this case, you will not be able to buy any fresh term plan. But through renewals, you can extend the policy coverage because the insurer cannot deny the renewal of the original plan if there is an option of policy renewal.
If you fail to renew your term insurance plan, it will automatically lapse. But, next time, wherever you go for buying a fresh term plan, you will have to begin afresh and may also have an increased waiting period. You should know that a lapsed life insurance policy cannot be renewed, and you need to apply for a new one.
Term insurance plans may have a waiting period, spanning between 1 - 3 months to 4 years. The waiting period depends on the age of individual and medical history. There is a different waiting period assigned for various critical illnesses before the individual can get full coverage under the term plan.
During the waiting period, you and your family will remain exposed to financial risks in case of any emergency.
As mentioned above, you need to start afresh if you miss your term plan renewals. In the lapsed policy case, the insurer requires you to undergo certain medical tests before insuring you again. But, when you renew your term insurance policy, you will not be asked to undergo any medical tests, irrespective of your health condition.
The term insurance plan does not just provide financial security to your loved ones, but you can also enjoy tax benefits on the premiums paid towards its renewal.
Under Sec 80C of the Income Tax Act, 1961, the individual is entitled to claim a tax deduction of up to Rs. 1.5 lakh per financial year on the premium paid.
Therefore, if you fail to renew your ongoing policy, you clearly stand to lose the applicable tax benefits.
Most of the term plans have a minimum and maximum entry age of 18 and 65 years, respectively, with tenure ranging up to 30 to 40 years or even whole life. For example, if someone buys a term insurance plan at 55 years of age, he/she can enjoy coverage up to 85 years of age.
Suppose you buy a term plan at 58 years of age but fail to renew it after continuing it for 7 years. In this case, not only does your policy lapse, but you also lose the opportunity to buy a term plan again in your life. You are also exposed to much higher financial risks, in case of any medical emergency, due to your advanced age.
Compared to any other life insurance policy, the term insurance plan is an entirely unique one. It offers multiple benefits to policyholders in a single plan, right from its affordable premiums to additional risk covers, making it suitable for every individual.
The following are the benefits that make term insurance policy unique and worth considering to renew every time.
Compared to other types of life insurance plans like endowment plan, money-back plan, whole-life policy, ULIPs, which are relatively complex and difficult to understand, term insurance plans are straightforward and quite easy to follow.
They are pure life insurance cover, which ensures financial protection of the surviving dependent in case of death of the insured.
One of the major benefits of a term insurance plan is, you get a high life cover at an extremely affordable premium amount. The reason for the lower premium amount is because the insured only pays for the death benefit.
Further, the premium payments can be made either monthly/ quarterly/ semi-annually/ yearly, making it easier to continue with the policy without any financial burden.
Compared to any other life insurance policy, the term insurance plan provides more extended life coverage. Most of the term plan provides coverage up to 85 years of age, but some even provide coverage till the age of 99 or 100 i.e. whole life.
In case of the death of the insured, the insurer pays the whole sum assured to the nominee or the family members. The payout can be in the form of either lump sum, monthly, annually, or combination of lump sum and payments at regular intervals.
You can also add other term insurance riders like comprehensive accident benefit (CAB) rider, waiver of premium (WoP) rider to enhance the benefit of the basic term insurance plan. This helps to reduce the overall financial risk from health and medical emergencies.
As you have noticed, there is more harm than good done by not renewing your term insurance plan. You not only compromise your family's future financial security by not renewing but also put them at more significant risks and vulnerabilities.
Having a life insurance policy is a sign that you care for yourself and your loved ones. And, in today's age of digitization, you can renew your term insurance policy at the click of a button, offering greater convenience, flexibility, and less stressful life.
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