What is Term Insurance Renewal and Why Is It Important?
Renewing your term insurance policy to avail the benefits offered under a term plan is called term insurance renewal. In this post, we are discussing its meaning and importance to guide you better.
The sole purpose of a term insurance plan is to secure a family financially in the event of death of the term insurance policyholder. If a term insurance policy is not renewed on time, it might lapse. And in that case, the nominee of the policyholder will not receive any benefit in the event of death of the insured. Thus, the family might have to undergo financial hardships if the insured dies suddenly without renewing the term plan, thereby wasting the money already paid on premiums so far. Hence, non-renewal of policy brings an end to the effective use of a term plan.
Further, you may also note that term plan renewal doesn’t require the policyholder to go through medical examination. Thus, your medical history has nothing to do with term insurance renewal as the insurer renews the plan without levying any additional charges.
What is Term Insurance?
Term insurance policy is nothing but a kind of Life Insurance plan which allows the policyholder to provide monetary coverage to his/her family against the uncertainties of life. So, when a term insurance policyholder dies within the tenure of the policy, his/her family members receive the sum assured paid by the insurer. If the policyholder has a family with many dependents like kids, parents, spouse etc., buying a term plan serves as a good option to secure their future.
What is Better – Reviving a Lapsed Term Plan or Buying a New Term Policy?
Whether to revive a lapsed plan or buy a new policy ? This is a question that many ask and many get confused with. When someone fails to renew a term plan, it gets lapsed. Normally, insurance companies allow a grace period of 15-30 days to renew policy even after the last date of policy renewal is gone. However, if you fail to renew the plan within the grace period, it lapses automatically.
However, whether to renew a lapsed plan or to buy a new plan is something that depends on the individual. But you must check all the aspects related to plan renewal or plan buying before taking a final decision. You should analyze every aspect of your requirement rather than just looking at the premium rate.
Here are few differences between reviving plan and buying new plan:
|Renewed Term Policy||Buying New Term Policy|
|Policy will be available with benefits like No Waiting Period||Everything will start from scratch and no cumulative benefit will be offered|
|You don’t need to go through medical examination||You would have to go through compulsory medical examination|
|You will receive benefits of complete tenure of the plan||You will not receive full tenure benefits of term plan|
Why is Term Insurance Renewal So Important?
Term insurance renewal is important because if the premium is not paid, the policy gets lapsed. This will deprive your family of the financial security that they may receive in case of your sudden demise. By renewing your term plan, you can continue to avail the coverage as per your age and requirements.
Below are some reasons why term insurance renewal is important:
- You get tax deduction – A sum of up to INR 1,50, 000 can be exempted under section 80C of income tax. Also, if you avail any term plan rider such as critical illness rider, you can get further exemption of INR 25,000 under section 80D of income tax act.
- You get to pay the same premium – By renewing your policy on time, you can continue to pay the same amount of premium, which might change in case your policy lapses.
- Health test and KYC – Undergoing health test and submitting KYC documents is not required in case you renew your policy on time.
What are the Disadvantages of not Renewing the term Life Insurance?
- Purpose of insurance is eliminated – If you do not renew your policy, the basic purpose of the term plan will not meet. This is because the policy will lapse and the benefits cannot be availed by the beneficiary.
- Term policy benefits get discontinued – Your family or nominee will not get the benefits in the form of sum assured if you do not pay the renewal amount of the term plan.
- Can’t avail tax benefits – You will also not receive the exemption benefit of up to INR 1,50,000 as tax benefit if you do not renew the policy.
- Nominees can’t file claims – The nominee of the policyholder can’t file a claim for your term plan if the policy is not renewed.
What are the Advantages of Renewing Term Life Insurance Online?
- It saves time and money
- You can renew from the comfort of your home
- You can use any of the online payment mode
- There are less chances of making a mistake while submitting the documents or details
Difference between Convertible and Renewable term Insurance
People often get confused regarding which type of term insurance is renewable? You may note here that there are two types of clause in term insurance plans – convertible term insurance and renewable term insurance.
Now you may wonder what is the renewable term insurance clause? Renewable term insurance clauses allow the policyholder to extend the existing coverage of the existing plan. So, here the coverage term can be extended for a specific time period without the policyholder getting to re-qualify for new coverage.
On the other hand, in case of a convertible term plan the policyholder can convert the policy coverage into whole life coverage anytime before turning 70 years.
Term Insurance Renewal Process
Here are the steps:
- Visit the official portal of your insurance provider
- Go to the renewal section of term plans
- Submit information like policy number and contact details
- Check the details of policy premium
- Finally, make the payment using online payment mode
Read More: What is Term Insurance with Maturity Benefits?
To Sum Up
Renewing your term plan every year on a timely basis is important to receive required benefits. Most insurance companies send reminders to policyholders to pay their renewal amount on time. It is the responsibility of the policyholder to keep a note of the date and renew the policy for the benefit of their family members. Renewal is an easy and simple process that can be done easily without any hassle. So, renew your plan to receive maximum benefit and to keep the financial security of your loved ones intact.
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