What Happens If You Survive The Policy Term Of Your Term Life Insurance?

by SMCIB on Wednesday, 03 May 2023

What Happens If You Survive The Policy Term Of Your Term Life Insurance?

Imagine you and your family are on a road trip when your car’s tire bursts. You find yourself stranded in an unfamiliar area and no one around to help. Fortunately, you have a spare tire. You are glad that you had the foresight to carry a spare tire, ensuring your safe return home.

Similarly, we can never really predict when a tragedy will occur, so it's your responsibility to ensure that your family is secure and taken care of at all times, especially if you are the primary earning member. Having a proper financial plan is crucial to ensure that your family is prepared for whatever the future holds. 

This is where term insurance comes in. It’s the simplest life insurance product and the best way to safeguard your loved ones’ financial futures in your absence. The plan promises a guaranteed payout if you pass away when the policy is active. This money can help your family members take care of their daily needs, financial goals, and other obligations. 

But, what happens if you survive your term insurance policy period? Will you get anything from the plan? We’ll find out - in this article!

First, Let’s See If You Should Buy Term Insurance

Purchasing term life insurance policy is a smart move if -

? You Have Financial Dependents Or Visibility Of Them
If you are the sole breadwinner of your family, you may be responsible for your financial dependents’ livelihood and life goals. A financial dependent is a family member who is reliant on you for both their short-term and long-term financial needs. It is important to have an adequate financial plan in place to ensure your family's needs are met, no matter what happens. Term insurance will provide them with financial security and stability, allowing them to lead a comfortable life without any financial worries - when you're long gone.

?You Have Financial Obligations
You may have taken out a large loan, such as a home loan, car loan etc. If you pass away before repaying it, your family will have to bear the debt burden. It's like loading a boulder on the shoulders of your family. A term insurance policy can prevent this from happening. It will ensure that they are not saddled with the financial burden when you are not around them. They can use the claim payout to pay off any outstanding debts or loans.

What Are The Benefits Of Term Insurance?

Here are the top advantages of a term insurance policy -

1️⃣ A straightforward product
A term insurance policy is the easiest and simplest form of life insurance. Its only purpose is to ensure that your family will be provided for in unfortunate circumstances. In the event of your untimely demise when your policy is active, the claim amount serves as a financial cushion for your family, giving them the means to move on with their lives.

2️⃣ Cost-effective
Term insurance policies are very affordable. For instance, you can obtain 1000x cover for the annual premiums you pay, which is a much higher return than other life insurance products. This makes term insurance policies an attractive option for those who are looking to get the best value for their money.

3️⃣ It’s highly customisable
Term insurance plans can be customised based on your family's needs.

➔    You can choose whether you want your family to receive the claim amount as a lump sum payout, regular monthly income, or a blend of both - depending on their financial aptitude and goals.
➔    You can choose to pay off your term insurance premiums quickly and enjoy coverage for the rest of your policy period - using the limited pay option.
➔    You can enhance your coverage by opting for the increasing cover feature that will increase your cover amount automatically until it reaches a maximum limit. If you anticipate increasing responsibilities in the future and/or want an inflation-proof cover - this may be an apt choice for you.

Note: There can be other customisation options available with term life insurance plans and you can pick from them, based on your needs and preferences.

4️⃣ Additional Benefits
Term insurance plans also offer riders that provide additional coverage in certain circumstances. They can be added to your base policy by paying an extra premium. Some popular riders available with term insurance include Critical Illness Rider, Accidental Death Benefit Rider, Accidental Disability Rider, Waiver of Premium Rider, Hospital Care Rider, Surgical Care Rider, etc.

For instance, Ravi has a term insurance policy with a sum assured of Rs 1 Crore. He also buys a critical illness rider with a cover amount of Rs 10 lakhs. A few months later, he gets diagnosed with lung cancer. Since he has a critical illness rider and the diagnosed illness is listed under the policy, his insurer will pay him Rs 10 lakhs. Ravi can use this money to take care of his medical expenses.

Coming back to the question - What Happens If You Outlive The Policy Term Of Your Term Life Insurance?

If you survive your policy duration, you do not receive anything back. This is the only drawback of term insurance. So, to be on the safer side, it's best to properly assess your needs, goals, dependents, etc. and choose an appropriate policy duration in the first place. A little time and effort at the beginning can save you a lot of stress and hassle down the line. And, this will ensure that your family is not left without protection - when they need it the most.

In case you buy the Term Return of Premium (TROP) plan, the insurer will pay back all the premiums you’ve paid (minus the taxes) - if you outlive the policy term. A TROP plan is a type of term insurance plan that offers a death benefit to your nominee if you pass away while the plan is active and a maturity benefit to you - if you live beyond the policy period.

Wrapping up!

Term insurance is a great option for anyone looking for a cost-effective way to safeguard their family without breaking their budget. While a regular term plan may not generate any maturity returns, the policy provides your family with much-needed financial security in your absence, making it a worthwhile option.

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