Despite their increasing popularity, many people still have questions like ‘what is a term plan?’ So, let’s start off by addressing this query. A term plan, also known as a term insurance plan, is one of the affordable ways to ensure that your family stays protected financially. It is basically a contract between an individual, known as the policyholder, and an insurance service provider.
A term plan provides the policyholder with a life cover of a predetermined sum of money for a specific period of time, known as the policy tenure. If the policyholder dies within the specified period, his nominee would receive the predetermined sum of money, known as the death benefit payout, from the insurance service provider. Nominees can then use this payout to meet their lifestyle expenses.
However, in return for this life cover, the policyholder would have to make regular payments, known as premiums, to the insurer. These premiums generally would have to be paid regularly without any fail. As long as the policyholder pays these premiums, they get the benefit of the life cover. Here’s a quick tip. Make use of a term insurance calculator if you’re unsure of just how much premium you would have to pay for a term plan.
As you can see, a term plan plays a crucial role in the financial protection of your family. And so, it is important to constantly keep it active. Otherwise, you might lose the protection. Here’s where term insurance renewal comes into the picture. Let’s take a more in depth look at this concept.
What is term insurance renewal?
When you first purchase an offline or an online term plan, you would be asked to make a premium payment. And depending on the frequency that you choose, which can be either monthly, quarterly, half-yearly, or annual, you would be required to make all the subsequent premium payments.
And as you’ve already seen, a term insurance plan continues to protect you and your family only as long as you pay the premiums, right? So, apart from the first premium payment at the time of the purchase of the plan, all the other subsequent premiums that you pay are considered to be term insurance renewal payments.
This is because when you stop making premium payments on regular basis, the term plan lapses - after a grace period - and it ceases to provide cover to you and your family. And so, to prevent the term insurance policy from lapsing, you need to renew it through the periodic payment of premiums.
How to renew your term insurance plan?
Renewing your term insurance plan is extremely easy. All that you need to do is pay your premiums regularly on time, in accordance with the frequency of premium payment that you chose when you first purchased the plan. There are two primary ways of renewing your term insurance plan. You can choose to do it online or offline. Let’s take a quick look at both of these options.
A. Online term insurance renewal
Renewing your term plan could take only a few minutes. Term Insurance renewal online payment can be made in the following ways:
- Visit your insurance service provider’s website.
- Navigate to the premium payment section of the website.
- Enter the details of your term insurance policy.
- Make the payment online.
You can either choose to pay your term insurance renewal premiums manually using this process every time or you can set up an electronic mandate depending on options provided by the insurance provider. When you set up an electronic mandate, the premiums get auto-debited from your bank account and your term insurance gets renewed automatically ensuring you don’t miss your renewal premium payment dates.
B. Offline term insurance renewal
Alternatively, if you prefer to renew your term insurance plan through the offline mode, then here’s what you could do.
- Visit a branch office of your insurance service provider with your policy document.
- Make the payment through either cash or cheque.
- Collect the receipt for the payment from the branch office.
Importance of term policy renewal
You’re probably aware of the importance of term policy renewal by now. However, let’s take a quick look once again.
1. It ensures continuous protection
Policy renewal is crucial to ensure that the term plan continues to stay active and provide protection to you. When policyholders miss out on renewing their term plan, they create a time gap in the protection. And if something were to happen to them during this gap, their families would not be eligible to receive any death benefits whatsoever. This can put them in a tough spot financially. That said, all of this can be prevented by just renewing term insurance on time.
2. You may lose out on premiums paid
If your term plan lapses due to non-renewal, you will lose out on all the premiums that you paid until you revive your lapsed policy.
Now that you know the importance of term insurance renewal, ensure that you pay your renewal premiums on time to avoid getting into trouble later. On the other hand, if you intend to buy a term plan in the future, make sure to use a term insurance calculator to determine your premium payment obligations beforehand. This can help make sure you stick to them.