Term Insurance Renewal: Why is it Important to Renew?

A term insurance policy remains active only until you renew it. Read on to know more about why it is essential to renew your plan.Buying a term insurance policy is one of the best ways to protect your family's financial future. But, just as it is vital to buy the right plan to suit your specific needs, it is critical to diligently pay the premium and renew the policy on time to enjoy its benefits.Typically, the term insurance policies are to be renewed annually. When you buy the policy, it is paramount that you pay close attention to the renewal date and keep a note of it. It is advisable to renew the policy on or before the renewal date to avoid paying late fees.The insurers in India know that sometimes it may not be possible for policyholders to renew the plan on time due to a lack of funds or other reasons. To help people continue with their policy without losing its benefits, they provide a grace period, usually of 15-30 days. It varies from one insurance company to the other. The grace period is the maximum duration allowed by the insurance company to renew the insurance policy before it gets lapsed.

• No Financial Benefit To The Family First and foremost, letting your term life insurance policy lapse due to non-renewal will defeat the purpose of buying a term insurance cover. Policy lapse means no coverage, and in the event of your sudden demise, the dependent family members will not receive any financial benefit. Hence, renewing the term insurance policy within the due date is vital to secure loved ones' financial future.
• The Policy Can Become Expensive When you buy a term insurance plan, the insurance companies consider several factors like your age, lifestyle, gender, health profile, liabilities, etc., to determine the premium amount. For example, suppose you buy a term insurance policy at the age of 25, and you have no underlying health condition. In that case, the insurer will consider you as a low-risk individual and offer you coverage at an affordable premium.However, if you fail to renew your policy on time and your policy lapses, then you will lose the premium paid so far. Also, you will be considered as a high-risk insurance buyer. When you try to buy a new policy at a later stage, you would have to pay a higher premium and undergo a medical test, which also involves a high cost.Thus, timely term insurance renewal is vital to continue enjoying the policy benefits at a lower premium.
• Increased Waiting Period As said earlier, if you fail to renew your term policy, it will automatically lapse. This means when you buy a new plan, you would have to comply with the waiting period norms again. The waiting period is the time when the insurance company is not liable to compensate for the loss of life.Typically, the waiting period for term plans varies from one month to 4 years. The insurers decide the waiting period based on the policyholder's age at the time of buying the policy and their medical history.
• No Tax Benefits A term insurance policy not only provides a death benefit to the beneficiary, but it also provides tax benefits. The premium you pay towards the policy is eligible for tax deduction under section 80C of the Indian Income Tax Act to a maximum limit of Rs. 1.5 lakhs per annum. Therefore, if you fail to renew the policy, you will lose the tax benefits.

Also Read: Buy Term Plan First When Planning to Buy Life Insurance

Thus, it is evident that term insurance renewal is vital for giving your beloved family members a financial cushion even in your absence.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.