Term Insurance Renewal

You keep your digital devices up to date by maintaining and upgrading their software regularly. Just as you update your devices for optimal performance and protection against new threats, renewing your term insurance is a crucial step to ensure that your family is financially secured no matter what.

Just like outdated software may expose your devices to vulnerabilities, an expired term insurance policy leaves your family exposed to financial risks. Term insurance renewal is all about extending your coverage beyond its expiration date to ensure uninterrupted protection for your loved ones - no matter what comes their way. But is term insurance renewal possible? Let’s find out - in this article!
 

First, What Is Term Insurance?

A term insurance plan is like a straightforward deal, offering the simplest way to safeguard your family's financial future. Here's how it works: If something happens to you while the policy is active, the insurance company steps in and provides a sum of money to your family, known as the 'sum assured'. This essentially steps in to replace your income, ensuring your family's financial needs are taken care of without compromising on their dreams and lifestyle. The way your family receives this money depends on the claim payout option you chose when you bought the policy.

Here’s a catch, though - if you make it through the policy duration, no benefits are paid to you. And once it ends, you can't renew or extend its coverage.
 

What is Term Insurance Renewal?

Renewing insurance is like ensuring your ongoing shield against potential risks and financial setbacks. While health insurance might call for renewal every 1, 2, or 3 years, term insurance takes a different route.

With term insurance, it's not about regular renewals once the policy expires; instead, you maintain coverage by paying the specified premiums. These premiums secure the risk protection your policy promises throughout the chosen term. It's like a commitment – you pay a specified amount to guarantee that your family can claim the agreed payout if the unexpected occurs during the policy period.

The beauty of it? You have the flexibility to tailor premium payments according to your needs, creating a more personalised approach to safeguarding your loved ones.

Here are some of the customization options available when it comes to premium payments -

Premium Payment Duration

When it comes to premium payment duration, a term insurance policy offers the following options -

• Single Pay Option
  With the single pay option, it's a one-time deal – you make the premium payment in full when you buy insurance, and you're covered throughout the policy term. This option takes the hassle out of recurring payments. So, it is perfect for those who are financially solid and prefer not to worry about paying premiums regularly.
   
• Limited Pay Option
  Choosing the limited pay option gives you the flexibility to wrap up your premium payments within a set period. This means you fulfil your premium obligations sooner, ensuring continuous coverage for the remaining policy duration. You can pay your premiums based on your preferred frequency – yearly, half-yearly, quarterly, or monthly. As long as you keep up with your premium payments, your policy automatically renews each year.
  Limited pay is a smart choice if you anticipate irregular income in the future, especially for self-employed individuals or businessmen. It's also great if you plan to buy a term insurance plan with policy duration beyond retirement. You can go for the limited pay option until your retirement age, securing a term cover for an extended period.
   
• Regular Pay Option
  With this option, you'll be making premium payments until the policy reaches its end. Just like the limited pay alternative, you can opt to pay your premiums annually, semi-annually, quarterly, or monthly. As long as you stay on top of your premium payments, your policy will remain active.

Premium Payment Frequency

You get to choose how often you pay your policy premiums, and there are four options to pick from -

• Annually
• Semi-annually
• Quarterly
• Monthly

You can select the relevant option that suits you best based on your convenience and financial preferences.

It's crucial to have a clear understanding of the premium payment term and premium payment frequency. When deciding on the premium payment, consider your financial outlook for the future. Ensure that you can comfortably manage these premiums throughout the committed duration, especially with limited and regular pay options.
 

Reasons Why Term Insurance Timely Premium Payment Is Important

Here are some compelling reasons why paying your term insurance premiums on time is crucial -

• Your Family Will Be Left Without Protection
  If you don't pay your term life insurance policy premiums on time, your family could be left without protection. This means that if something were to happen to you during the policy term, your family wouldn't receive the cover amount. This lack of financial support could lead to significant hardships for them, creating uncertainty about their financial future.
   
• Miss Out On The Advantage Of A Fixed Premium Throughout The Policy Term
  The significance of term insurance lies in its consistent premium structure, unlike health insurance, where premiums tend to increase at each renewal. For instance, if you purchase a term plan at the age of 30 with a premium of Rs 18,000/- for a sum assured of Rs 1 Crore over the next 30 years, you'll continue paying the same Rs 18,000 (regular pay) even when you're 55, regardless of any changes in your age or health.
  However, failing to pay your term insurance premium on time can result in your policy lapsing. If you decide to revive it later or purchase a new policy, you might face an increase in the premium amount due to changes in age and medical history. Paying your premium promptly ensures that you avoid any rise in premium amounts or additional charges for your term plan. It's a way to lock in the benefits of a constant premium throughout the policy term.
   
• May Require Documentation And Medical Procedures Once More
  If you miss premium payments and your policy lapses, you do have the opportunity to revive it within 5 years from the original premium due date, depending on your insurer. This period may vary across insurers. Another option is to consider purchasing a new insurance policy. However, it's important to note that going through this process again involves undergoing medical tests, providing documentation, and more. Additionally, there's an increased likelihood of facing challenges, such as a higher chance of rejection, possibly due to new health concerns or medical conditions that may have emerged during this period.
   
• Incur Revival Charges
  As we mentioned earlier, there's a chance to revive your policy, but here's the catch – you'll incur a penalty. Once your revival is approved, you'll be required to settle all overdue premiums up to the date of revival, along with the applicable interest rate. On top of that, your insurer will apply revival charges. It's important to note that the renewed premium will likely be higher due to factors like ageing, and if any new health issues have surfaced, they could further contribute to the increase.
   
• May Lose Your Protection Under Section 45
  As outlined in Section 45 of the Insurance Act, if your life insurance policy has been in force for three consecutive years, insurers are prohibited from denying a death claim based on fraud, misstatement, or the suppression of facts. However, should you miss premium payments and face a break in your term insurance, you lose the protection provided by this guaranteed immunity.
   

What Do You Lose When You Do Not Pay Your Term Insurance Premium On Time?

Getting term insurance is just the first step; it's equally essential to stay on top of your premium payments. Ensuring timely payments guarantees the continuous term insurance renewal and active status of your policy until its term concludes. Missing even one premium payment poses the risk of your policy lapsing.

The main goal of a term insurance plan is to secure your family in case of your demise. However, failing to pay on time puts this security at risk, undermining the very purpose of term insurance.

If you happen to miss the premium due date, insurers typically provide a grace period and revival period. Yet, reinstating the policy may involve paying additional charges, interest, and higher premiums. If your policy lapses, it may impact potential tax benefits but, more critically, deprives your nominee of the ability to file claims – defeating the core purpose of having a term insurance plan in the first place.
 

Term Insurance Premium Payment Process

Making premium payments for your term insurance is super easy with these steps -

1. Head to the official website of your insurer.
2. Log in to your account and select the 'pay premium' option.
3. Enter details like your policy number, registered mobile number, etc.
4. Choose your preferred payment mode, whether it's through internet banking, UPI, debit card, credit card, credit card EMIs, e-Wallets, and more.
5. Digital wallets like GooglePay, Paytm, PhonePe, etc., can also be used for hassle-free premium payments.
6. Payments can generally be made using the wallet balance or UPI facility.
7. Simply provide details such as your policy number, registered mobile number, etc. to complete the transaction.
    

Pro Tip:

To ensure you never miss a premium payment, you can -

• Set up a reminder on your calendar, making it a routine task.
• Opt for standing instructions with your bank account rather than a credit or debit card. Unlike cards, bank accounts don't have expiration dates that could potentially hinder payment processing.
   

What Happens If You Deliberately Or Inadvertently Miss Paying A Premium?

Initially, you'll have the opportunity to settle the premium within a grace period of 15 days (in the case of the monthly premium payment mode) to 30 days (for other modes). Next, you'll have a final chance to revive your lapsed policy during what's known as the revival period, usually spanning 5 years. If you fail to pay the premiums within this timeframe, your policy will lapse, meaning your life cover will cease to exist. And essentially, you stand to lose both your invested money (premium) and the financial protection your policy offers to your loved ones.
 

Wrapping up!

By paying your term insurance policy premiums, you’re ensuring that this protective shield is intact. If you miss paying on time, you could face risks, lose out on benefits, and encounter difficulties in bringing your policy back on track. This highlights how crucial it is to stay on top of your term insurance policy’s premium payments to uphold your family’s financial security.
 

FAQs

1. What is renewal in term insurance?
   Term insurance renewal involves extending your current insurance policy beyond its expiration date, ensuring a continuous shield against potential risks and financial setbacks. Yet, it's crucial to note that once a term insurance policy concludes, you cannot renew or extend its coverage.

2. Does term insurance premium automatically be paid?
   Setting up standing instructions or auto-debit on your bank account ensures that your term plan premium is automatically paid, saving you from the hassle of going through the payment process repeatedly.
    
3. How do I renew and keep my term insurance active?
   Once the policy term concludes, term insurance renewal cannot be done. Keeping the policy active is straightforward - just ensure you make your premium payments on time.