Should You Revive Your Old Term Insurance Policy or Buy a New One?

Understanding Term Insurance Lapse

Before we dive into the debate of reviving an old term insurance policy or buying a new one, let's first understand what a term insurance lapse means. A term insurance policy lapses when the policyholder fails to pay the premium within the grace period. Typically, the grace period lasts 30 days after the premium is due. If the premium is not paid within this period, the policy lapses, and the coverage ceases to exist.

When Does Term Insurance Lapse?

Term insurance policies usually lapse due to non-payment of premiums. However, there are other reasons that can lead to a policy lapse, such as:

• Insufficient funds in the bank account for auto-debit of premium.
• Change in bank account details without updating the insurer.
• Failure to submit necessary documents for policy renewal.
• Policyholder's death during the grace period.

It is essential to keep track of your premium due dates and ensure timely payment to avoid a policy lapse.

Reviving an Old Term Insurance Policy

If your term insurance policy has lapsed, you have the option to revive it within a specific period. The revival period varies from insurer to insurer, but it is usually between 2-5 years from the date of the policy lapse.

How to Renew Term Insurance Policy After It Lapses?

To revive your old term insurance policy, you will have to follow these steps:

• Contact your insurer: The first step is to contact your insurer and inform them about your intention to revive the policy. They will give you the required paperwork and forms and walk you through the procedure.
• Submit the required documents: You will have to submit a revival application form along with a declaration of good health and any other documents requested by the insurer.
• Pay the premium: You will have to pay the outstanding premium amount along with any late payment charges and interest as per the insurer's terms and conditions.
• Undergo medical tests: Depending on your age and the sum assured, the insurer may require you to undergo medical tests before reviving the policy.
• Wait for approval: Once you have completed all the necessary steps, you will have to wait for the insurer's approval. If your application is accepted, your policy will be revived, and you will receive a confirmation from the insurer.

Pros of Reviving an Old Term Insurance Policy

• Lower premium: Reviving an old term insurance policy is usually cheaper than buying a new one. This is because the premium is calculated based on your age at the time of policy purchase. So, if you revive your old policy, you will pay the same premium as you did when you first bought the policy, even if you are older now.
• No need for medical tests: In most cases, you will not have to undergo medical tests to revive your old term insurance policy. This can save you time and hassle.
• Continuation of policy benefits: By reviving your old policy, you can continue to enjoy the benefits of the policy, such as the sum assured and any riders you may have added.

Cons of Reviving an Old Term Insurance Policy

• Limited revival period: As mentioned earlier, the revival period for a term insurance policy is usually between 2-5 years. If you fail to revive your policy within this period, you will have to buy a new one.
• No option to increase coverage: When you revive an old term insurance policy, you cannot increase the sum assured or add any riders. This means that you will have to continue with the same coverage as before, which may not be sufficient for your current needs.

Buying a New Term Insurance Policy

If your term insurance policy has lapsed, you also have the option to buy a new one. Let's look at the pros and cons of this option.

Pros of Buying a New Term Insurance Policy

• Flexibility to choose coverage: When you buy a new term insurance policy, you have the flexibility to choose the sum assured and add riders as per your current needs. This ensures that your loved ones are adequately covered in case of your untimely demise.
• Longer policy term: Revived policies usually have a shorter term compared to new policies. By buying a new policy, you can extend the coverage period and ensure financial security for your loved ones for a longer duration.
• Competitive premiums: With the increasing competition in the insurance market, you can find term insurance policies with competitive premiums. This means that you may be able to get a better deal by buying a new policy.

Cons of Buying a New Term Insurance Policy

• Higher premium: As mentioned earlier, the premium for a term insurance policy is calculated based on your age at the time of policy purchase. This means that if you buy a new policy, you will have to pay a higher premium compared to when you first bought your old policy.
• Medical tests: When buying a new term insurance policy, you will have to undergo medical tests, which can be time-consuming and may also reveal any pre-existing conditions that can increase your premium.

Which One Is Better - Reviving an Old Term Insurance Policy or Buying a New One?

The decision to revive an old term insurance policy or buy a new one depends on various factors, such as your age, health condition, and financial goals. Here are a few scenarios to help you make the right decision:

• If you are young and healthy, it may be better to buy a new term insurance policy as you can get a better deal and higher coverage.
• If you are older and have pre-existing health conditions, it may be more beneficial to revive your old policy as you may have to pay a higher premium for a new policy.
• If you have added riders to your old policy, it may be better to revive it as you can continue to enjoy the benefits of the riders.
• If you have outgrown your old policy and need higher coverage, it may be better to buy a new term policy.

Conclusion

In conclusion, whether you should revive your old term insurance policy or buy a new one depends on your individual circumstances. It is essential to evaluate your options carefully and choose the one that best suits your needs. Remember, the primary purpose of a term insurance policy is to provide financial security to your loved ones, so make sure you have adequate coverage to fulfill this purpose.

Also Read: Term Life Insurance vs Whole Life Insurance vs Endowment Plans: What is More Suitable For You?