Is your term policy is expiring? Know about the available options

Almost each one of us now is aware that Term Insurance Policy has an expiry date. When a term insurance policy expires, so does your life cover from the policy. As we already know that term insurance policy is for a specific period of time. When the family of the insured individual faces unexpected demise of the policyholder within the term mentioned in the policy they are subject to a death benefits claim from the insurance company.

The amount for which the insured individual has availed the policy is transferred to the nominee or beneficiary as death benefit claim. So by having a term insurance policy the insured individual expresses his care for his family and children relieving them of any kind of financial burden.

Unfortunately, if the insured dies within the specific term mentioned in the documents at the time of purchasing the policy and he have taken a loan or mortgaged property. Then the family can repay the loan or free the mortgaged property against the loan with the term insurance claim amount. Also, any loan against the education of children or any other kind of financial obligation can be taken care of.

But what some of might not know that if the term insurance policy expires and the insured individual is the survivor then what happens? You pay the last premium for the term insurance policy and let it expire. You will have to live without the life cover and get nothing from the insurance company as claim settlement. The policy has no cash value. If you outlive your term, the money you have put in the company stays with the company. Term insurance is not a savings or investment plan.

If you make up your mind that you still need continued life coverage for the rest of your life depending upon the future prospects you need to buy a new insurance policy, be it term insurance or life insurance. You again need to go through the hectic procedure of filing necessary required documentation, medical tests, filling up the forms and finally submitting them physically or online.

To avoid this mind tiring procedure again what you need to do is read the documents and contract carefully before submitting them physically or online. People just go through the synopsis and fill up the forms without wasting any further time and energy.

Reading the documents and contract is a matter of a relaxed mind. One should invest time in going through the contract before finalizing it avoiding any future disappointment. When the term insurance expires you are left with no life coverage and nothing to claim from the company.

When you read the contract in detail you become aware of any new rules and regulations that might have been introduced by the company or IRDAI (Insurance Regulatory Development Authority of India). Also, you can know about your future course of action when the term insurance policy expires.

The term insurance policy comes with an option of inbuilt 'Rider' A built-in rider allows the insured to convert the term insurance into whole life insurance once the term insurance with life cover expires. To avail the option of a rider the insured individual needs to consult with the company.

This procedure must start at least six months before the term insurance policy expires to avoid last-minute rush and life cover gap. If the insured expires or faces death just after a day or week or month when the term insurance policy has expired, still he is left without life coverage and the nominee is entitled to claim nothing from the company providing the life cover. This may disappoint and depress the family and nominee left behind.

Opting for a built-in rider makes sure you need not go through the same procedure of medical tests and filing the documents again when you buy a new policy cover or converting your term insurance into whole life insurance. Your medical tests and reports remain the same as at the beginning of buying the policy even if your health has degraded. You can also decide when and how much of the coverage to convert.

Converting a term insurance policy is like purchasing a new policy. You are the one who needs to decide the next term of the policy if opting for a term insurance policy depending upon your health condition and financial liability if any. Conversion to a whole life cover policy can also be opted for.

You can also opt for return of premium term policy in which if you outlive your term the premiums you paid to the company is repaid by the company. But it is to be noted here that the premiums paid under the return of premium term insurance policy may be 5 per cent to 15 per cent higher than the gross premium paid for a regular term insurance policy for life cover.

Another accessible option is to renew your term insurance policy. Many term insurance policies come with a renewable option wherein you can renew your present term policy without your medical tests and underwriting and can extend the coverage term. You do not need to re-qualify and to prove your insurability.

Renew your insurance policy option also renews the amount of premium you pay to the company to get a life cover. Every time you renew your policy, the amount of premium will always be higher than the amount of premium you paid for the previous policy.

Suppose you purchased a term insurance policy at the age of 20 years for a 30-year term for which you paid an annual premium of Rs. 12,000. At the end of 30-year term when you are 50 years of age you decide to renew your term insurance policy and extend your life cover for another 20 years. Now, the amount of premium has jumped to Rs. 1,20,000 annually. So, each time you decide to renew your term insurance policy you need to pay a higher premium.

There are a number of benefits from renewing a term insurance policy. Your life coverage is reclaimed at the end of the initial term. You do need to resubmit your documents and reappear for medical tests. It allows you to keep the original face value or death benefit amount of the term insurance policy.