When we think of insurance, the most common policy type that comes to mind is term insurance. A term plan is the simplest form of a life insurance plan within which a policyholder pays regular premiums to the selected insurance company for a life cover. If the policyholder dies during the policy term, their family receives the death benefit.
Therefore, a term insurance policy protects your family from financial difficulties in the wake of the untimely death of the breadwinner. Furthermore, since term insurance premiums are relatively low, particularly if the policyholder is a young and healthy individual, you must purchase a term plan at an early stage in your life.
What is renewable term insurance?
Term insurance plans run for a fixed term, which is usually between 20 and 30 years. Assuming the policyholder lives beyond the policy term, the return on the policy becomes zero. However, the policyholder may want to extend the coverage once the policy expires, perhaps owing to health issues or long-term financial commitments, for instance, caring for an orphaned grandchild.
In the aforementioned cases, if the policyholder were to purchase a new policy, the premiums could be much higher and the application process quite cumbersome. To ease the financial strain on such policyholders, insurance companies offer renewable term insurance plans. A renewable clause in a term insurance policy allows the extension of the coverage for a fixed number of years beyond the original term without the policyholder having to meet additional conditions such as medical fitness.
Can I convert my term insurance policy into a renewable term insurance policy?
When your term insurance policy is about to expire, you have the option of extending the term with a renewability clause. The main condition of the aforementioned clause is regular premiums payments from you over the original term of the policy. To extend the coverage of your renewable term plan, you need not make a fresh application nor is a medical test required.
The premium under a renewable term policy is much higher than plain term insurance premiums. However, it is lower than a fresh term policy at an old age. Annually renewable term insurance is the most common renewable life insurance policy. In the aforementioned policies, the premium and the coverage remains intact for the entire policy term.
How should I choose a suitable renewable term policy?
There are several term insurance plans in India and you can choose the adequate one after a thorough analysis of your present financial situation and your expected financial commitments in the future. You can input your details in the premium calculators available on the websites of insurance companies.
For instance, the Tata AIA term plan offers a life cover upto the age of 100 years. After selecting a term plan, you can choose the frequency of the premium payment which can be monthly, semi-annually, or annually.
You can top up the extent of the coverage and enhance the protection offered under the selected policy through the purchase of add-on riders covering critical illness, disability, or hospitalisation. A majority of term plans have flexible payout modes, including a lump sum payout, regular income, or a combination of lump sum and regular income.
Is a renewable term insurance policy a good idea?
In today’s uncertain times, everyone understands the need for term insurance. If you have reached the end of your current policy but still expect some financial commitments to emerge in the future, a renewable term insurance policy is an excellent choice for you.
Conclusion
A renewable term insurance policy is an option through which you can extend your life insurance cover when the original term is about to end. Although the premiums of the aforementioned policies are reassessed annually, their benefits far outweigh the slightly higher premium. Only the term policies with a renewability clause can be renewed; therefore, you must ensure that the aforementioned clause is present in your selected term policy before buying it.
