How To Avoid Lapse of Term Insurance Policies? The term plan is the easiest life insurance product to comprehend of all the options. A term insurance policy is purchased to cover dependents’ expenses in the event of untimely death. It remains the most affordable option to safeguard your future earnings and ensure that your dependents are able to maintain their financial stability without you. When you are the sole provider or when you have debts (like a mortgage loan), it is especially important to make sure your dependents are not put in a difficult situation.
How To Avoid Lapse of Term Insurance Policies?
However, if a premium payment is missed, the insurance would lapse, defeating the entire point of purchasing a term policy. All benefits under the policy end upon policy lapsation. The coverage will be terminated (with no benefits and all previously paid premiums being lost) if the premium is repeatedly late. Thus, it is crucial to keep the policy active in order to continue receiving the benefits of term insurance.
Another reason not to let a policy lapse is that premiums rise with age, making it more likely that you’ll pay more if you try to purchase a new term plan later on. The time of declining prices is now behind us. Additionally, as we age, our medical conditions may change, which may affect the issue of a new insurance. However, the old policy shouldn’t be affected, provided that the medical condition developed after the policy was purchased.
Pay bills on time
To prevent your insurance coverage from expiring, make your payments on time or earlier. The insurance company offers a grace period (often 30 days for annual/semi-annual/quarterly method of premium payment and 15 days for monthly mode of premium payment) if the policyholder does not pay the premium by the due date, during which time he or she has the option to pay their outstanding premiums.
You can take advantage of the grace period if there are brief cash flow or liquidity problems because the policy is still in effect and offers all of its benefits. Only when the policyholder fails to pay the required premiums during the grace period will a policy become expired. During the grace period, all benefits are still in effect.
Set up recurring payments
It is usually wise to set up standing instructions to ensure that the premium will be automatically deducted from your account on the due date, even though insurance companies will remind you to do so. This can be set up when you buy the term policy, or if you prefer, you can do it later. In either case, your insurance company will help you. This may be done relatively easily, and many businesses also provide digital or online solutions for it.
You have the option to choose the date on which the debit will occur with auto-debit options. Although the RBI restrictions in this area have made the process a little more difficult than before, you can also opt automatic payment using your credit card rather than your bank account.
How Can Term Insurance Policies Not Expire?
You won’t need to remember to pay the premium in order to keep receiving the benefits of the term plan as long as your account balance is sufficient. The insurance provider will contact you to confirm that you are maintaining the funds in your account, even if you have set up a standing instruction for auto-debit.
Keep your contact information current.
Make sure the insurance company has your most up-to-date contact information (mobile, email, and address) if you want to receive all correspondence from them. This will allow you to sign up for premium reminders, and the majority of businesses will send you reminders by SMS, email, and letter. It is highly advised to update the insurance company right away in the event that your contact information changes after you purchase a policy.
Change the payment schedule
The annual payment option will have the greatest premium amounts. Most term plans will allow you to switch the frequency of your payments to monthly in the event that you experience a little setback and find it difficult to make your annual premium payment. Be sure to confirm this with the seller of the product you have chosen. You can lessen your workload as a result of this modification and keep receiving the policy advantages.
Set spending priorities.
If you are having trouble making ends meet, assess your financial status and set priorities for your spending. A long-term plan, which is a real need, should be near the top of the list. In the modern market, there are additional ways to borrow money to tide you over temporarily (credit card payments through EMIs, changing annual premium payments to EMIs, etc.).
renewal of an expired policy
In the worst-case scenario, if you are unable to continue making premium payments and the policy expires, you still have the choice to reinstate the coverage if things get better. The typical reinstatement period for a lapsed policy is two years from the date of the final delinquent premium payment.
The policyholder must pay the unpaid due premiums and interest on account of the delayed premium payment in order to reinstate the policy. Depending on how much time has passed, the policyholder can additionally be required to submit a declaration of good health or undertake testing in order for the insurance provider to reevaluate the risk. The insurance company has the last say on whether to renew the coverage.
In conclusion, a term plan provides financial security for your loved ones in the event of an untimely passing. If you pay your premiums on time and with discipline, you’ll have a tool for mitigating risk. Any unpaid premium will cause the policy to expire, at which point, in accordance with the terms and conditions of the policy, the benefits and/or coverage are no longer available.
How To Avoid Lapse of Term Insurance Policies?