Another important thing that buyers need to do is to understand the different types of term insurance and the many term insurance benefits they get to experience. One such type of term plan that many people may not be fully aware of is renewable term insurance.
What is renewable term insurance?
Renewable term insurance is quite easy to understand. Simply put, it is a kind of term plan where the coverage is renewed periodically, for a specified period, without the policyholder having to prove that they are insurable. In other words, the policyholder does not have to requalify for their coverage each time.
The only condition here is that the policyholder should pay all their premiums on time, as and when they are due according to the policy’s terms and conditions. So, now that you know the basics about renewable term insurance, let’s take a look at how this kind of life cover works.
How does it work?
The fact is that a renewable term plan is same as a regular term plan. An example can give you better clarity about how renewable term insurance works.
Let’s say Sanjay uses a term insurance calculator and discovers that he needs Rs. 1 crore to financially secure his family in his absence. So, he purchases a renewable term insurance plan at the age of 30. The plan offers him a sum assured of Rs. 1 crore and is valid for a period of 40 years. That means, Sanjay can enjoy the life cover till he attains 70 years of age.
At the time of purchase, the life insurance provider takes into account different factors like Sanjay’s age, his occupation, his medical history and his family’s medical history, and fixes the premium for his renewable term plan at Rs. 6,000 per annum.
Now, because this is a renewable term plan, Sanjay need not requalify for this coverage at the end of each policy year. As long as he continues to pay his premium promptly, this cover will remain valid for the entire policy term of 40 years.
