Over the past few years, India’s life insurance market has grown significantly. People are choosing term insurance among other types of life insurance in increasing numbers.
Individuals are even more eager to acquire life insurance now that the outbreak has killed a significant number of people.
A guarantee from life insurance is that your loved ones will have financial security following your passing.
You compensate the insurance company with a premium in exchange for them taking on this risk. No claims may be filed after the term insurance policy expires for nonpayment of the premium. What then can you do in this circumstance?
Should you renew the policy or get fresh term insurance?
When Does Term Insurance Lapse?
The term insurance policy is, as previously said, a contract between the policyholder and the insurer.
You pay the recurring payments as the policyholder, and the insurer maintains your life insurance in exchange. Your nominees will get the death benefit if you pass away at any time while the policy is in effect.
However, your coverage expires if for whatever reason you forget to pay a payment. The premium must be paid on schedule.
The coverage terminates if you don’t renew your term insurance policy, even if the insurer typically allows you a grace period of roughly 30 days to pay the balance after the due date.
A lapsed policy is not eligible for any claims.
How to Renew Term Insurance Policy After it Lapses?
After the policy expires, you have two options for reinstating it –
1.Throughout the Grace Period
As previously indicated, the insurance company provides a grace period that lasts from 15 days to a month. If the premium wasn’t paid on time, you can easily pay it during the grace period to acquire your term insurance without paying any further fees.
2.The Grace Period and Beyond
If you don’t renew the policy within the grace period, the coverage will expire. You can still reactivate it, but the insurance company will require that you pay the accumulated premium plus interest.
Additionally, many insurers impose a late fee. In addition to this, you will be required to have a health assessment.
If your health circumstances have significantly altered, the premium rate will also increase. When considering whether to renew a term insurance policy, you must take the costs and charges into account. You might think about obtaining a new cover if they appear to be really high.
Revive Term Insurance or Buy a New One – Which One is Better?
The typical term insurance plan has a certain period of time, usually 2 years, during which it can be renewed or restarted.
However, full underwriting would be done at the time of revival or reinstatement. The early death provisions are also applicable for a period of two years following the date of policy revival or reinstatement.
But if you want to resurrect your current term strategy, you should think about –
The premium rate will be modest if you purchased the current policy while you were young. The price of the same cover today would be significantly more.
Additionally, continuing your already purchased term insurance plan at a significantly reduced cost may make a lot of sense because term insurance premiums are locked at the age at which you buy them and do not rise later like health insurance plans.
It could feel a little taxing on your finances because you must pay the required premium for the expired term plus the cost of revival when you revive the policy.
Therefore, it might make sense to renew it if the gap tenure is minimal. It can make sense to purchase new term insurance if the cost is extremely high.
3.Reassess Your Term Insurance Requirement
Insurance companies now give their clients with a variety of alluring offers. In fact, several of the more recent programmes have advantages that older ones did not.
Instead of renewing your current term insurance policy in this situation, it can make more sense to get a new one.
When renewing a lapsed term insurance policy, certain term policies provide significant reductions.
It is simpler for you to reinstate the plan because many insurers waive the interest and penalty charges.
Think about the options you have. Also, don’t forget to evaluate the advantages and disadvantages of the new term insurance plans online before making a choice.
Term insurance is inexpensive, so if you find a newer, better policy at a competitive price, consider purchasing it rather than renewing an old one.
The choice of whether to reinstate a lapsed plan or obtain new coverage must ultimately be made after weighing the advantages and downsides and considering the cost.