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Term Insurance Renewal

Term life insurance is one of the best life insurance policies available in the market. These policies are designed to protect the policyholder financially. On the death of the person insured, the nominee gets the death benefit. It requires minimum documentation, and it requires timely payment. But sometimes we forget to pay the premium due on time or the policy's term is over. In such cases, term insurance renewal can be done.

What is Term Insurance Renewal?

A term insurance renewal is when the person insured chooses to continue the policy after the end of the policy term. The term insurance renewal can have an increase in the rate of interest. Sometimes the rate also changes due to change in guidelines of the policy. Policy renewal is essential for policy continuation. If a person fails to renew the term policy, it lapses. This has a damaging effect not only financially but also because the family is at greater risk of the death of the person insured. term policy renewal helps to maintain term insurance plans, and the person does not need to verify the documents again. Also, there are various added benefits available on continuous policy renewal.

When to Renew a Term Insurance?

The term insurance policy renewal date is based on the date the policy commences and the length of the term period of the plan. Usually, policies are renewed after 6 months or 1 year. Most of the term insurance plans are locked in for 1 year. They need to be renewed annually.

When policies need to be renewed, the information is usually mailed via email from the policy provider 30 to 45 days before the policy period's end. The policyholder also receives the information explaining the benefits of the renewal and declaration page. Proof of policy renewal and new term insurance card is sent along with the declaration on policy renewal. 

What Should One Do When Term Insurance Renews?

Policy renewal helps in reviewing the policy purchased, checking new discounts, and adding benefits to coverage. It also helps in checking whether the policy conditions are still applicable to the policyholder and if the policy provider company made any changes. It's also a time to check if an add-on needs to be removed or added to the policy. One can also change their policy if they are not happy with the current one.

For those planning on continuing the policy can pay the premium amount. It is essential to pay the premiums on time because it means that the policyholder wants to continue with the current plan. It is necessary to pay the renewal amount on time since all policy providers don't have a grace period so that the policy may lapse. And for those planning on discontinuing the policy need to cancel it as some insurance providers charge extra for grace periods if the person insured doesn't notify them of cancellation. 

Why should one not fail to renew their Term Insurance Policy timely?

As a responsible policyholder, one should not be lazy while renewing the term insurance policy. Renewing policy is as important as buying a new policy. If a policy is not renewed on time, then it will lapse. So the person insured won't be able to claim any benefit. This is why one should not fail to renew a term insurance policy on time. For those not renewing the policy on time, there are lots of disadvantages.

Disadvantages of not Renewing Policy

The following points highlight the disadvantages of not renewing the policy:

  • On non-renewal, the term insurance plan lapses, this defeats the purpose of having a term insurance plan in the first place. No active policy, no benefits & coverage offered.
  • On the demise of the policyholder, there will be no financial security on the surviving dependents or family members. They will not be entitled to any benefit of the policy. After bearing huge medical bills, the person insured will have to suffer from financial liabilities in case of critical illness. So renewing term insurance policy within the due date is necessary. It protects your loved ones from chaos

  • The insurance provider company, while deciding the premium for a term insurance plan, takes various factors into account. It includes age, weight, gender, lifestyle, medical history, and total coverage. For policyholders who bought the policy at a younger age or with no medical history of major diseases can get premiums at a lower rate.

  • On non-renewal of the policy, the policy not only gets lapsed but also the person insured will lose premium benefits, and she/he loses the low risk-taking. Renewing or buying a new premium policy at a later stage will cost higher, and the person will have to give medical tests as well.

  • Timely renewal of term insurance plans is necessary. If the policyholder is diagnosed with a major disease in such a case, the person will not be able to buy new term insurance due to various clauses. But the policyholder can renew the policy and extend the policy coverage. The insurance company will not be able to deny the renewal of the existing plan.

  • On the non-renewal of the policy term, it will lapse. On buying a new term insurance policy, the policyholder will have to start from a fresh waiting period. All policies will have a waiting period. Usually, term insurance plans have a waiting period from 3 months to 4 years. The period depends on the medical condition of the person insured. Plus, there are different waiting periods for critical illness. Some policies offer a reduction in the waiting period after continuous renewal. If a person buys a new policy, she/he will be exposed to financial risks for critical illnesses in emergencies. Hence for getting full coverage renewal of policy is essential.

  • The policyholder will need to start again; one misses the term insurance plan renewals. In case of a lapsed policy, the policy-provided company will require the person to be insured to have medical tests again before issuing a term plan. But on renewal of term insurance policy, the person insured won't be asked for any medical tests, irrespective of their health condition.

  • Tax benefits - Renewal of term insurance plans not only provides financial security but also tax benefits. All tax benefits can be availed under Section 80C of Income Tax Act of 1961. The tax benefits are against the premiums paid on policy renewal. The policyholder can claim a tax deduction of Rs 1.5 Lakh annually on premiums paid.

  • All the term plans have a minimum entry age and maximum entry age of around 18 to 65 years, with the policy tenure of about 30 to 40 years or whole life. For example, if the person insured buys a term insurance plan at 54 years of age, they can enjoy coverage up to 85 years of age.

If a person buys a term plan at 58 years of age but fails to renew it after 6 years, in such a case, the policy will lapse, but the person insured loses the opportunity to buy a term plan in their life. The policyholder gets exposed to higher financial risks, in case of any medical emergency. 

Benefits of Term Policy Renewal 

The term insurance plan offers multiple benefits to a person insured in a single plan like affordable premiums and additional risk covers. The benefits of term insurance that make the policy unique and worth considering renewing are:- 

  • Easy to Renew

    Term insurance plans are pure insurance cover, which provides financial security to the surviving dependent in case of death of the insured. Premiums for term plans are very easy to renew.

  • Affordable Premiums

    A major benefit of a term insurance plan is that the person insured gets a high life cover at an affordable premium amount. For policy renewal, some policy provider companies provide an option of rebates on policy renewals. This makes the premiums much more affordable. Further, the premium can be paid monthly, quarterly, semi-annually, and yearly, making it easier to pay the amount and continue with it.

  • Whole Life Coverage

    In comparison with other life insurance policies, the term insurance plan has extended life coverage options. On continuous policy renewals, the whole life coverage can be availed. A term plan has coverage up to 85 years of age, while others provide coverage till the age of 99 or 100 i.e., whole life on continuous policy renewal.

  • Critical Illness Coverage

    Critical illness coverage can be added to the term insurance policy, in which the person insured will receive a higher sum payout from the policy provider on the diagnosis of critical illness. There is a waiting period for a minimum of 3-4 years for critical illness, but this can be waived off or reduced on continuous policy renewals.

    Some riders provide accidental benefits and waiver of premium riders, which can be chosen to enhance coverage of basic term insurance plans while renewing the policy. 

Things One Should Keep in Mind in Renewal of the Policy

The need for term life insurance renewal is to provide a contingency plan for the policyholder and his/her family. Most of the term life insurance policies have a fixed time for which they remain active. Whether there is a payout upon outliving that period or not, it is essential to renew the policy at the end of the grace period. If one doesn't apply for renewal, the person might remain uninsured for the rest of your life, and their family will be left vulnerable. The whole point of term insurance is lost if not renewed. So let's take a look to keep things in mind while renewing a term insurance plan.

  • Grace Period

    There are two conditions in which policy needs to be renewed. Either the policy has lapsed, or the term plan has ended. In both cases, there's usually a specific period given to the policyholder from the date of lapse or maturity of the policy in which one can apply for policy renewal. This period is known as the grace period. In case of a lapse or renewal, there is a fixed period in which one can pay for overdue premiums with penalties or annual premiums to renew your policy. This grace period can vary in insurance companies.

  • Medical report

    The policyholder may require a new medical test report for the revival of term life insurance, which depends on the policy provider. With the passage of time and age, medical conditions and health may deteriorate. As the mortality risk increases so that policy providers may require a new medical test. If the policy has an in-built renewal option, then one might not require a new test. For non-smokers with no significant health issues, the premium rates are lower.

  • Policy revival offers

    Often policy providers offer rebates for renewal of term insurance policies. So one can check renewal offers and get a rebate on premium rates.

  • Conditions for revival

    Every policy provider has specific terms and conditions for policy renewal. Before applying for the policy renewal, it is best to check the condition since it is one of the prime factors which must be taken into consideration before policy renewal. It is necessary to pay attention to terms and conditions related to the following:-

    • Insurability
    • Date of revival
    • Rate of new premium
    • Policy riders or add-ons
    • Payment of overdue premiums
    • It is essential to check for the change in terms & conditions before the renewal of policies of term life insurance.
  • Renewal VS New Policy

    Often policyholders are in a dilemma whether to go with a new policy or renew an existing one. A person might be tempted to buy a new policy entirely. However, choosing a new policy has its own set of drawbacks.

  • Cost

    Buying a new policy can be much more than the renewal of one's existing policy. Cost or premium rate is a significant aspect of policy renewal. If a person opts for a whole new term insurance policy when the current one ends, the new one will likely cost more than the first policy. Even if applying for the renewal of a lapsed policy costs a higher premium, it will help save extra costs associated with a new policy. On comparing costs, it is seen that the renewal cost of the policy is quite less.

  • Tedious paperwork

    All the paperwork and tedious process will be required to be re-done for a new policy, which can be avoided entirely if one chooses to renew their existing policy 

Steps to Renew a Policy

There are various options available for renewing a term insurance scheme.

  • Online process

    For renewing the policy, visit the policy provider company's website.

    • Step I: Log in to the policy provider website with the credentials given at the time of buying the policy.
    • Step II: Select 'renew policy option.' Enter the policy number.
    • Step III: On the next page, check for various details like name, age of family members, email, and mobile number. Click on 'continue'.
    • Step IV: Here, a person can renew the policy or terminate it. Click on 'renew the plan.
    • Step V: There will be multiple riders shown, which can be added to the policy for added coverage. The policyholder can either choose to add them or remove them. Choose the required option. An online premium calculator is available on the website. Select to add or remove riders; the policy premium will be changed automatically. After selection, the above click 'proceed.'
    • Step VI: There is an option to add or remove family members. For adding members, select 'add members.
    • Step VII: Add the necessary details.
    • Step VIII: Click the proceed option.
    • Step IX: Agree to the changed details in the policy terms & conditions. If additional documents are required, then select - 'Upload documents' and upload all necessary documents. After uploading the check, the 'following details given by me are correct' option.
    • Step X: Click on 'I agree that the above information filled by is correct'' to proceed.
    • Step XI: Select 'send OTP.' The website will send OTP to the registered mail and mobile number.
    • Step XII: Enter OTP. The secured payment page will open, continue with the payment process.

On payment, new policy documents will be mailed. A person can also renew the policy by visiting the nearest policy provider branch. 

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Written By: Paisawiki - Updated: 06 July 2020
Disclaimer: Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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