Why It Is Important to Renew Your Term Life Insurance on Time
No one can predict the future, especially during the ongoing uncertain time due to the coronavirus (COVID-19) pandemic. As precaution is always better than cure, securing your loved ones’ financial future is of utmost importance. Investing in a life insurance plan is one of the best ways to provide financial protection to your family, even if you are no longer around. There are numerous insurance plans available in the market, but term insurance is an ideal option. If you want to learn more about what is term plan, read on.
Term insurance is one of the purest and most straightforward types of insurance plans available in the market today, as it offers a high sum assured at a pocket-friendly premium. Having term insurance is a necessity today. However, it is also essential to pay your premiums on time if you want to continue reaping the policy’s benefits. If you fail to renew the policy when required, the insurer offers a 30-day grace period during which you can pay the premium and keep your term plan active. If you do not do the needful during the grace duration, the policy will lapse automatically.
Drawbacks of not renewing your term plan
If you do not renew your term insurance policy:
- The objective is not met
The primary purpose of buying term life insurance is to safeguard the financial future of the family. If you do not renew your term insurance plan on time, then the policy will lapse, and your loved ones will be unable to avail of its benefits. If the policy expires and something untoward happens to you during this period, the insurer will not pay any death benefit to your nominee. So, your wish of providing financial security to your family will not come true,
- The cost may increase later
You have to pay premiums to the insurer to continue reaping the benefits of the policy. Factors like age, lifestyle habits, and medical history, among others, can influence the cost of the premium. If you do not renew the term life insurance policy on time, the insurer will provide you a grace tenure. However, if you cannot revive the term plan even during the grace period, you will have to pay an interest that can prove costly.
- You will lose tax benefits
One of the primary reasons why people buy term insurance plans in India is to save tax. Under Section 80C of the Income Tax Act, 1961, you are eligible to claim the premium towards the term plan as a deduction. The maximum permissible limit for this tax exemption is INR 1.5 lakh per annum. Besides this, the death benefit that your nominee will receive is tax-free as per Section 10(10D) of the Act. If you do not renew your policy on time, the plan and the associated benefits will lapse. With this, you will no longer be able to reap any tax deductions.
As term plans are one of the best ways to provide financial security to your family when you are not there to look after them, it is essential to ascertain the sum assured and the premium while purchasing such a policy. The premium of your policy rises with an increase in the sum assured. So, opt for a premium that you can easily afford. Therefore, it is advisable to ascertain how much money you can spare from your income to invest in term insurance plans in India. Do not jeopardize the financial future of your family by not renewing your term plan on time. As life is uncertain, it is important to do effective financial planning for your family’s future.