What To Do When Your Term Insurance Policy Expires
Life takes many twists and turns, some expected, and some, quite unexpected. If the unexpected occurrences add value to your life, they are pleasant and easy to welcome. However, what if something untoward happens unexpectedly? In that case, it is important to have a financial safety net that can keep your loved ones secure and safe financially, and help them fulfil their life goals as per their original plan. Here is where a term policy appears. With term insurance in your financial portfolio, you can be rest assured that your family’s life goals - like the education of your children or the dream of your loved ones to live in their own home - remains on track and are fulfilled as per plan, even in your absence.
If you do not have a term policy in your portfolio yet, you may be wondering what a term plan is, and what benefits it offers. Simply put, a term plan offers not only a life cover, but also gives you term insurance tax benefits too. Let us begin at the basics to understand all of this in a better manner.
What is term insurance?
A term insurance policy is a pure protection plan that offers life cover for relatively low premiums. Among the different types of life insurance policies, a term plan is the affordable option for the long-term financial security of your family. When you opt for a term policy and pay timely premium, your nominees or beneficiaries become eligible for death benefit. This helps them lead a comfortable and stable life even in the absence of a primary or secondary source of income.
Another defining feature of term insurance is that it comes with low premium. Term policies are affordable kinds of life insurance, since they offer pure protection. Therefore, if you are looking for life cover at low premium rates, a term plan is the suitable option. With online term plans, you can even make your purchase right from the comfort of your home.
How term insurance works?
Before your purchase a term policy, it is important to know exactly how term insurance works. That way, you can understand its benefits more clearly.
When you buy an online term plan or purchase one through an agent, it essentially provides you with life insurance coverage for a specific period or "term". In the event of your unfortunate demise during this term, the insurance service provider will pay out a death benefit to your nominees.
For instance, let us suppose that a policyholder has a term insurance cover of Rs. 1 crore, for a policy term of 10 years. If the policyholder dies within these 10 years, the insurance company will pay out the sum of Rs. 1 crore to the beneficiary or nominee of the policyholder.
In addition to the life cover, term insurance tax benefits are also very advantageous to the policyholder. The premiums paid for a term policy are eligible to be deducted from the total taxable income of the taxpayer, thereby reducing the tax payable. This is as per section 80C of the Income Tax Act, 1961, and premium payments up to Rs. 1,50,000 are eligible for this benefit.
Also, in the event of the unfortunate death of the life assured, the insurance pay-out received by the family members are exempt from tax under Section 10 (10D) of the Income Tax Act, 1961. The above mentioned tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time.
What to do when your term insurance policy coverage ends?
As we have seen earlier, a term policy offers coverage for a specific period. So, what happens after that period ends? Simply put, the coverage offered by the term insurance plan ends. Let us look at an example to understand this well.
Say a policyholder purchased a term plan that offers a life cover for a period of 30 years. He pays premiums regularly and continues to enjoy coverage during the 30-year period. In the case of his unfortunate demise during this period, his nominees receive the death benefits from the insurer. However, say he survives the 30-year period. After that, the coverage ends and he is no longer eligible for the benefits offered by the plan. Therefore, in case he passes away in the 31st year, his nominees will not receive any term insurance benefits.
What do you do when your term insurance policy coverage ends, then? Many policyholders face this dilemma. It’s all the more relevant because the life expectancy in the country is on the rise, and with more people living for longer, it is important to have coverage that extends for a significant part of their lives. 
Concerning what you should when your term plan coverage ends, most people tend to think there are two options - extending the policy or buying a new term plan. Is the former possible? Moreover, which option should you choose? Keep reading to find out.
Should you extend your policy term or buy a new term plan?
Unfortunately, the tenure of a term insurance plan cannot be extended. This is because the policy term is something that is predetermined and fixed. For instance, if you purchase a term plan with a tenure of 25 years, the cover offered by that plan will continue to be in place for that period only. You cannot extend it beyond that period.
Therefore, the best option to enjoy longer coverage is to buy a new term plan when your existing term policy expires. Before you buy a new term plan, however, remember to look at the eligibility criteria because many insurers have term insurance age limits beyond which it may not be possible to purchase a term insurance plan. If you want to circumvent this issue, you could opt for term life insurance that offer whole life coverage, up to the age of 99.
Therefore, you now know that when your term plan expires, it is best to opt for a new plan to enjoy extended life coverage. Another important thing to keep in mind is that to enjoy uninterrupted benefits, it is essential to pay your premiums on time. This way, your policy does not lapse, and your cover remains in place.
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