Over the years, prepaid electricity meters have become increasingly popular. It has simplified the process of energy management, allowing you to monitor and adjust your usage levels accordingly. And, to enjoy the convenience of electricity, you need to recharge the meter every month. If you fail to do so, you might experience a power outage - which can be quite a hassle.
In the same way, if you have bought a term insurance policy for the protection of your loved ones, it is crucial to renew it on time to reap its benefits. Or your policy may lapse, leaving your family in a financial bind.
In this article, we will discuss why renewing your term insurance policy is just as important as buying it.
What is Term Insurance?
A term insurance policy is intended to protect the financial well-being of your loved ones. Should something unfortunate happen to you, the insurance company pays a fixed sum of money called the ‘sum assured’ to your family members. This money basically replaces your income and your loved ones can use this money to meet their financial goals and dreams while maintaining their lifestyle. They will receive the money as per the claim payout option chosen by you at the time of policy purchase.
Thus, investing in term insurance is a prudent way to ensure that your family members have the necessary financial support to move on with their lives in your absence.
Note: If you survive the policy term, you won’t receive any benefits from the policy, since term insurance is a pure-risk cover.
Renewing a Term Insurance Policy
When you purchase a term insurance policy, you have to duly pay all the premiums to keep the policy active. Most insurers provide you three options to customise the premium paying duration. Let’s have a
look at them.
- Single pay option, where you need to make the premium payment all at once at the time of policy purchase and continue to be covered till the end of the policy term. Under this option, your policy will continue to renew on its own.
- Limited pay option, where you can pay off the premiums in a limited period of time. It allows you to complete your premium obligations sooner and remain covered for the rest of the policy period. You can pay the premium as per the chosen premium payment frequency (yearly, half-yearly, quarterly, or monthly). As long as you pay your premiums duly, your policy will keep renewing every year.
- Regular pay option, where you have to pay the policy premiums till the end of the policy duration. Like the limited pay option, you can pay the premiums on a yearly, half-yearly, quarterly, or monthly basis. Your policy will get renewed every year, provided you pay your premiums on time.
You can make the premium payment under term insurance by visiting the insurer’s official website. You will have to log in to your account and choose the ‘pay premium’ option - and enter details like your policy number, registered mobile number, etc. Then, you will need to choose the payment mode after which you will have a range of options like internet banking, UPI, debit card, credit card, credit card EMIs, e-Wallets, etc. Your term insurance policy will keep on renewing every year after you complete the premium payment. You can also use digital or e-wallets like GooglePay, Paytm, PhonePe, etc. to make the premium payment. The payment can generally be made through the wallet balance or using the UPI facility. You just need to provide details like your policy number, your registered mobile number, etc.
Note: To avoid missing out on the premium payments, you can set up auto-debit or standing instructions. Since debit/credit cards come with expiration dates, setting up a standing instruction on a bank account will ensure continuity and help you avoid payment difficulties.
Why is Renewing Your Term Insurance Policy as Important as Buying It?
In order to keep your term insurance coverage active, you have to pay your premiums on time. If you fail to renew your term insurance policy -
?Your family will be left unprotected
You might lose your life insurance coverage. This means that in the event of your untimely death, your family won’t receive the cover amount under your policy to meet their financial obligations. They will have to face dire monetary consequences and an unsecured future.
?You will have to undergo the documentation and medical process again
In case you fail to make premium payments on time and your policy lapses, you get the chance to revive it within 2-3 years from the original premium due date. You also have the option to buy a new insurance policy. However, you may have to undergo medical tests, documentation, etc. once again.
Even if you go through the entire process of purchasing a new term insurance plan again, there is a higher likelihood of your proposal getting rejected. This might be because you contracted a new disease or developed a medical condition, etc. And, there is also a chance that your premiums might be considerably high if you revive your old policy or buy a new one.
?You may lose out on the 3-year payout guarantee
As per IRDAI guidelines, it is compulsory for insurers to honour life insurance claims without any questions once a policy has been in force for three consecutive years. If you miss out on paying your premium and there is a break in term insurance, you will basically lose out on this guaranteed immunity. So, if you pass away within 3 years of buying a policy and your nominee files a claim, your insurer might conduct an investigation on the grounds of fraud, misstatement, or suppression of facts - leading to unnecessary delays in the claim settlement and payout process.
Term insurance is primarily designed to protect your family's financial future. In order to ensure that your family is well-protected, you must renew your policy by making timely premium payments. If you fail to do so, the policy may lapse, leaving your family financially vulnerable. Keep the above mentioned things in mind to avoid such a situation.