Why Should You Renew Your Term Insurance Policy?
Updated On Oct 03, 2021
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A policyholder must make sure to pay the premium towards their term insurance plan on time as upon failing to pay the premium on time, it would result in a policy lapse. However, most of the term insurance covers provide the option for renewal as a part of the policy.
Reasons Why You Must Renew Your Term Insurance Policy?
In case, the policyholder forgets to make payment for the term plan before the plan expiry date, then a grace period is offered by the insurance company, wherein you can make payment for the premium and the insurance plan can get reinstated. After the grace period ends, and upon failing to pay a premium the term insurance plan lapses.
Listed below are reasons why it is important to renew a term insurance plan:
1. Discontinuation of Policy Coverage and Benefits
If due to the non-payment of premium term insurance cover lapses, then you stand to lose out on the policy coverage and other benefits that you may have opted for in your term plan. Various add-on benefits such as personal accident cover, critical illness cover offered under the plan may discontinue if your policy lapses. There are certain insurance providers that provide the option of a grace period to reinstate a lapsed term insurance plan, however the period offered differs from insurance company to insurance company.
2. Claim Filing
It is important to renew your term plan before the policy expiry date because in case you miss your renewal date and the plan ceases to exist then it is possible that your insurance company may reject your advances for claim. Thus, defeating the sole aim of buying a term insurance plan. The nominee would not be entitled to receive any sum assured in the event of eventuality. Hence, it is advisable to keep up with the plan renewal dates in order to keep your loved ones financially protected even in your absence.
3. Premium and Sum Assured Gets Affected
The premium remains constant at the time of term insurance plan renewal. This means you are required to pay the same amount to get your insurance policy activated as paid by you when you had bought it. Failing to get your term insurance plan renewed on time can result in an increase in your premium amount. By getting your term insurance plan renewed on time you can make sure that you do not have to bear an increase in premium or extra charges for the term plan. In certain cases, sum assured might as well decrease due to a decrease in one’s income.
4. Tax Benefit
Other than offering financial protection to your loved ones in your absence, a term insurance cover additionally offers other benefits too, and one amongst them is tax benefit. A term insurance plan is tax deductible for a maximum limit of up to Rs. 1, 50,000 according to section 80C of the Income Tax Act. Moreover, you can claim for other tax benefits with add-ons like accidental death benefit, critical illness etc for a maximum limit of up to Rs. 25,000 as per section 80D of the Income Tax Act. If your term insurance plan lapses, then the tax benefits you receive would also discontinue.
At the End
After going through the afore-mnetioned points, you may have now somewhat understood the importance of getting your term insurance plan renewed on time. There are various life insurance companies that send renewal reminders to their customers before the expiry date. As a policyholder, your responsibility is to stay updated on the renewal dates and make timely payments.
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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.