A term policy, by definition, offers a life cover only for a limited period of time. The coverage can be sought for a duration of as low as five years. These plans are relatively low cost and can be afforded by young professionals or low-income individuals who want to spend a lower amount on life insurance, if at all.
But what happens if these plans expire? Even after the expiration of these plans, you may still feel the need to have insurance cover. This is especially true if your cover expires in your 30s, 40s, or 50s. For most people, these years are phases of life where you will have family members relying on you. This is especially the case for young parents, or individuals with older parents.
Thus, you may feel the need for another life cover after your term insurance cover expires. Before you think of getting another life insurance plan to remedy this situation, know that certain types of term insurance will allow you to renew your existing policy.
Let’s understand more about term policy renewal, which policies this applies to, and whether it is the right option for you.
Term Life Insurance Renewal
A term life plan can be used to get life cover for individuals aged 18 years and over. Depending on your insurance provider, these plans can be bought for as low as five years, or till your age of retirement (60-70 years).
It is often recommended that these plans be purchased earlier in life, since they are available at a lower cost for younger customers. Depending on your income, requirements, etc., you may choose to take a small duration plan, to keep your costs low.
When such as term policy expires, you have the choice to either buy a new plan or renew your existing plan. The latter is an option that may help you keep your expenses down since term plans tend to be less expensive than other life insurance options.
Types Of Renewable Term Plans
There are various sub-types of term insurance, and most of them will allow you to have the option of policy renewal post expiration. Nonetheless, it is important to carefully go through your policy document to understand this option and how you can exercise it.
Usually, plan renewal options will be open for customers only till they reach the maximum age limit for plan maturity. Beyond that, they will not be able to avail of term life cover. It is also important to note that even post renewal, the plan will offer the same core benefits as your existing term insurance plan. You will not be able to recreate it into a whole life plan, or any other such plan.
Furthermore, renewal may mean revised premiums, often higher. Term plan premiums increase with age. Since you are older at the time of your plan renewal, it may mean that you may need to pay more. To get an idea of regular premiums rates for these plans, you can use a term insurance plan calculator. Also, go through your policy document carefully as the terms and conditions may vary from one insurance provider to another.
Should You Renew Your Term Plan?
If you have a short duration term plan, you may have the choice of policy renewal, as it is available for most types of term insurance. If you are satisfied with your policy and would like for the same one to continue for the next few years, policy renewal may suit you.
It is also an appropriate option for anyone who does not expect to alter any benefits of their policy and seeks to keep the costs low. Most term plan purchases and renewals will not require any medical examinations, so the process should be hassle-free, and plans relatively low-cost.
If you are seeking a plan renewal at later stages, buy a plan that allows you to do so. Before buying, go through the policy document to understand the rules that guide the renewal process. Online term insurance plan calculators can also help you understand the premium differences between a seamless policy and a renewed one.