Many life insurance products are top-rated in India. One such life insurance plan that most people tend to invest in is the term insurance policy. Term insurance is the most affordable plan available in the market. The policy pays a lump sum amount to your dependents in the event of your untimely death.
While most people invest in long-term term insurance plans, some people opt for annual term insurance policies. In annual term insurance plans, you (the policyholder) needs to renew the plan every year so that your family is covered in unforeseen life events.
Now, whether you have a long-term or annual term insurance plan, the policy is bound to mature at some point in time. In this section, we are discussing why you should renew your term insurance plan without fail.
Benefits of Renewing Term Insurance Plans
- It continues to secure your family’s future
The primary objective of term insurance is to secure your family’s financial future in your absence. However, if your term plan matures and you fail to renew it, then the policy lapses and your family loses its financial security. Therefore, to ensure your family is secure at all times, it is important to renew your term insurance plan when it reaches maturity.
- A few term plans have paid-up benefits
Ideally, term insurance only offers death benefits to your beneficiaries after your death. The policy does have any savings component to it as it is a pure life insurance cover product.
So, when the policy matures, and you fail to renew it, you will receive no returns on all the premiums paid. This means that you will incur a significant loss. When you keep renewing your term insurance plan, it extends your cover for premature death. Furthermore, it keeps your loved ones financially secure in your absence.
- You can avoid additional costs
When you buy a term insurance plan for the first time, the insurer will take into consideration multiple factors to determine your premiums. Factors such as your age, medical history, lifestyle habits, current financial status, etc. will be observed. Based on it, the insurer will determine your term insurance premiums.
In case you fail to renew your term plan and the policy lapses, you have to undergo this procedure again. Also, you might end up paying higher premiums than the last time. You can use the term insurance premium calculator to determine the premiums charged on your new policy and see the difference for yourself.
So, to avoid the extra hassle and additional costs, it is wise to renew your term insurance plan on time.
- The plan offers tax benefits
Much like any other insurance product, term insurance also provides tax benefits. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the old income tax regime. If you stop paying your term insurance premiums, you will no longer be able to claim tax deductions under the said section. Also, your beneficiaries will end up losing the death benefits received on the plan.
While you are focusing on how there is no savings aspect on the term insurance plans, you are forgetting your purpose of buying the policy – that is to secure the financial future of your loved ones after you are gone. Hence, make sure that you keep your term insurance plan active to continue securing your family and reap other benefits as well.