Why Renewal Of The Term Insurance Policy Is Important?

The journey of life is like trying to find your way through a thick fog, it can sometimes feel like you don't know which way to turn, where the next step will take you, or how long the journey will be. Despite the uncertainty of life, you remain determined to ensure the safety and well-being of your loved ones. This is where term insurance can be of help. It is a reliable source of light to guide you through dense fog and keep your family secure - no matter what may come.

By investing in a term insurance policy, you ensure that your family has the financial security they need to live comfortably, even in the face of tragedy. It pays them a sum of money - should anything unfortunate happen to you during the policy period. This amount will provide them with immense peace of mind, knowing that they have the necessary resources to take care of their needs and goals in your abscence. At its core, a term insurance policy is an assurance that your loved ones will be financially stable - no matter what happens.

To ensure this security remains valid and up-to-date, you need to renew your policy on time. For this, you need to pay a fee called a premium to the insurer regularly. It is like paying a membership fee to a gym. As long as you pay the fee, you're entitled to use the facilities. As long as you pay premium, your loved ones are protected.

But, what happens if you don't pay the premium and renew your term insurance policy on time? Let's find out.

Importance of Paying Premiums And Renewing Term Insurance on Time

Buying term insurance is just the first step towards safeguarding your family's financial future. As mentioned earlier, to ensure this protection, i.e., to keep your policy active until the end of its term, you must also pay all your premiums regularly. If you fail to do so, your term insurance policy will lapse and put your family's financial security in jeopardy. This means that should you die untimely during the policy term, your family will not receive the cover amount. if premiums are not regularly paid and/or the policy has lapsed. This could result in devastating consequences of not having the money to meet their obligations when required thus ending up with a financial burden that may be too heavy for them to handle. This negates the purpose of opting for term insurance by you.

Failure to pay your premiums on time will also result in you losing the benefit under Sec 45 of the Insurance Act, which states that life insurers cannot reject a death claim due to fraud, misstatement, or suppression of facts after three consecutive years of coverage. If you miss a premium payment and there is a break in your term insurance policy, you will lose this benefit. (stating it is guaranteed protection is misquoting and against the regulation)

However, there is still a workaround. If you fail to pay their premium by its due date, you can still make it up by paying premium during the "grace period".

What Is Grace Period?

It refers to an additional period of time during which you can pay your missed premium instalment without losing your insurance coverage. The grace period can vary across insurers and generally depends on the premium payment frequency that you’ve chosen. If you pay your premiums on a monthly basis, you get a grace period of 15 days after your premium due date. Other than this, most insurance companies provide a grace period of 30 days after the original premium due date. In the event you fail to pay your premiums even within the grace period, your policy will lapse.

But, but, but... there's still a way to keep your policy active if you fail to pay the premiums even during the grace period.

Revival Period in Term Insurance

Insurers give you one more chance of reviving/reinstating your lapsed life insurance policy for a certain time period after the grace period. This is called the revival period. and it varies across insurers and in compliance with their product features.

To restore your term insurance policy, you'll need to submit a request for revival. After it gets approved, you’ll have to pay all due premiums till the date of revival along with the applicable interest rate and the revival charges if any imposed by your insurance company.

Drawbacks of reviving a lapsed policy

You may require additional medical tests

The insurer may ask you to undergo a medical examination based on your age. You may end up paying increased premiums since you need to go through the same process you underwent at the time of the policy purchase. Ultimately, this could result in an additional financial burden for you.

Terms and conditions may change if you develop a health condition

Morever, if you develop a new disease or medical health condition, you pose more risk to the insurer. So, they may charge additional premiums or impose new terms and conditions before re-issuing the policy or it some cases may reject it altogether.

To avoid all these hassles, it is always advisable to pay your premiums before the due date. This will ensure hassle-free payment and keep your coverage intact.

Wrapping up!

To keep your family safe and secure, it is important to ensure your term insurance renewal is done on time. Failing to do so could result in a policy lapse and leave them vulnerable to serious consequences. Although the insurer offers you a grace period and revival period to reinstate your lapsed policy, they do come with their own drawbacks. So, it is better to be diligent and stay on top of your premium payments and pay your premium regularly.