What Should You Do When Your Life Insurance Policy Gets Lapse?
Published On Nov 30, 2021
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Life insurance plans do offer the much-needed assurance that your family will be financially secure in the case you cannot provide for them. When you buy term insurance, you are essentially preparing a financial shield for your family.
Only buying a life insurance plan is not enough. You have to ensure you pay all your premiums on time to keep the plan active. Non-payment of premiums can cause the term insurance policy to lapse. If your insurance policy lapses, it is important that you renew your term insurance policy in time to ensure that the financial security net for your family remains intact.
Reasons Why Renewing Your Life Insurance Policy Is Important
The following are the reasons to prove the importance of life insurance renewal policy:
Ensure Continuous Financial Security For The Family
The main reason for getting life insurance is to financially protect your family when you are not around anymore. However, when you fail to renew your policy, the plan loses its purpose. Renewing your life insurance policy is important to protect your loved ones from facing a financial crisis in case of your unfortunate demise. Hence, you should pay equal importance to buy and renew your term insurance plan.
Avail Full Policy Benefits
Life insurance plans are insurance plans with a pure risk cover and no savings component. Hence, when you fail to renew your term insurance plan, you fundamentally lose out on the benefits of all the premiums you have paid. If you keep your policy active and renew it timely, your family can get the term insurance policy benefits.
Avoid Higher Premiums
When you buy life insurance, the insurance company considers your age, medical condition, lifestyle, gender, weight, etc., for determining the premiums. Your smoking habits also affect your term plan premiums; however, that does not mean you cannot have a policy. If you buy a life insurance plan at a young age and in sound health, you get lower premiums because of lower risk. In case you fail to renew your term plan, you lose out on the low premiums and also miss the benefits of the previous premiums paid. Further, if you buy life insurance at a later stage in life, you will get the same insurance for a much higher premium due to increased risk.
No Medical Tests
When you do not renew your life insurance plan and buy term insurance later, you have to start afresh. This means that you have to undergo medical examinations, which can be a hassle. Hence, it is better to opt for a timely renewal instead of purchasing a new plan.
Avail Full Tax Benefits
A significant benefit of buying a life insurance policy is a tax benefit. The premiums you pay for your life insurance plan qualify for tax benefits under Section 80C of the Income Tax Act, 1961. You can get up to ₹1.5 lakh in exemption under this section. But when you fail to renew your term insurance policy, you will not be able to claim tax benefits for the year in which you have not paid the due premium.
Apart from these benefits, renewing a term plan is an easy and quick process. However, if you have not invested in an insurance plan yet, you may compare the best insurance policies in the market and choose one that suits your needs.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.