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Renewable Term Insurance Explained

Renewable Term Insurance

Renewable Term Insurance Explained


January 21, 2021

By : Bajaj Allianz Life

If you are looking for life insurance plans, there are many options to choose from. For the simplest and an affordable kind of life cover, you can opt for term insurance plans in India. These plans are mostly suitable for everyone, irrespective of the budget you are shopping for, because term insurance premiums are very nominal.

Among the different kinds of term insurance plans in India, renewable term insurance is one of the most commonly available kinds of life cover. Keen on finding out more about renewable term plans? Let us get started at the basics.


What is term insurance?


Term insurance, which is an affordable kind of life cover, offers long-term security to your family. In the case of a term insurance policy, the nominees are eligible for death benefit on the policyholder’s demise. This helps them lead a stable lifestyle even in absence of the policyholder. In other words, it helps the surviving members of the family stay on track and accomplish their life goals even in case of an unexpected incident provided you have planned for the cover well.

Term insurance plans in India gives the policyholder the benefit of a relatively high life cover in return for a nominal term insurance premium payment.


What is renewable term insurance?


Now that you have a good idea of what is term insurance, it is time to look at one specific kind of term plan – renewable term insurance. It may appear to be a complex term, but in practice, it is quite easy to understand. This is, of course, only valid if the policyholder pays the term insurance due premiums on time, as per the term plan’s T&C. Therefore, that gives you some idea of the basic framework of a renewable term plan. To understand how this kind of insurance works, it is essential to look at the practical side of things. Let us get into those details now.


How does renewable term insurance work?


Renewable term insurance works just like a regular term plan, with a few minor changes. Let us look at an example to understand the workings of a renewable term plan.

Let us assume that Mr. Ashok purchases a renewable term insurance plan at the age of 25 with the Sum Assured of Rs. 1 Cr. The life cover offered in the plan is valid until he attains the age of 65. In return for the life cover, Mr. Ashok pays the insurer an annual term insurance premium of Rs. 10,000. Now, at the time of purchase, his eligibility will be verified and based on factors like his age and the condition of his overall health, he will be offered a life cover for the said premium.

In the case of a renewable term plan, the life cover continues to remain valid for the said period (in this case, until Mr. Ashok attains 65 years of age), as long as the premium is paid on time. In other words, he will not need to re-qualify for the life cover at any point during the tenure of the plan if he pay the premiums regularly. Renewability is important for renewable term insurance because it ensures that the life cover remains in place without the need to requalify for insurance. It comes in handy in case life brings along something unexpected that may render the policyholder uninsurable, because the life cover does not get affected, and so, the financial safety net for the family remains intact.




This is how renewable term insurance can be very beneficial to the policyholder. Before you purchase your term plan, check with your insurer if they offer this clause, so you can tap into the advantages it offers.

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.