When it comes to planning for the future, term insurance is a smart move. It offers financial protection for your family in case the unexpected happens. But what if you need to change the tenure of your term insurance plan?
In the uncertain times of today, buying life insurance is not an option. It has become a necessity for all. A life insurance policy lets you secure your family’s financial future even when you are not around. While there are different life insurance policies, Term Insurance is one of the most popular types.
While these policies are beneficial, they come for a fixed tenure. It means that after the completion, the policy will discontinue, whether you took advantage of it or not. Suppose you want to continue the same policy. In that case, extending the term of the current term policy is a better option than buying a new plan. It will save you the hassle of starting from scratch.
What is a Term Insurance Plan?
As the name suggests, term insurance provides coverage against death for a limited period or term. In term insurance, the insurance company pays the death benefit to the family members in case of your demise during the policy period. However, you do not get any survival benefit if you outlive the policy term, as term insurance does not have cash value.
Reason to Buy a Term Insurance Plan
Buying a term insurance policy is a smart move that offers various benefits. Let us dive right in and explore the various reasons to buy a term insurance plan.
Financial Security for Your Loved Ones
Picture this: You are the breadwinner of your family, and your loved ones depend on your income to lead a comfortable life. Now, what would happen if, something happened to you? Without a term insurance plan, they might struggle financially. But with a term insurance plan, your family would receive a lump sum amount (the death benefit) in case of your unfortunate demise. This money can help them cover daily expenses, mortgage payments, and education.
Affordable Premiums
The beauty of term insurance is that it is affordable. You can get a substantial coverage amount for a fraction of the cost of other life insurance policies. The premiums are lower because term insurance does not have any investment or savings component attached to it. You are paying for pure protection, and that makes it a budget-friendly option.
Customizable Coverage
Term insurance is all about flexibility. You get to choose the coverage amount and the term (the number of years you are covered) that suits your needs. Whether you want a plan for 20 or 30 years, it is up to you. You can also enhance your policy with riders like critical illness or accidental death benefits to tailor it to your unique circumstances.
Tax Benefits
Another perk of term insurance is its tax benefits. The premiums you pay are eligible for tax deductions under section 80C of the ITA (Income Tax Act). The death benefit is also tax-free under ITA Section 10(10D). So, not only do you secure your family’s future, but you also get to save some money on taxes.
Can you Extend the Term Insurance Policy Tenure?
The simple answer is Yes. You can extend the term insurance policy’s tenure and renew the same. If you have purchased a long-term policy, you may get coverage until you are 60-70. At the end of the original term, if you want to renew the policy and extend the coverage tenure by paying the adjusted premium based on your age at the time of renewal. However, each time you raise the coverage tenure, the premium will keep increasing.
People often tend to avoid extending the term insurance tenure because of the increase in the premium. Does it make sense to pay the increased premium? Let us tell you under what circumstances it is advisable:
- If you need coverage only for a short term, like two or three years after the end of the original insurance term, you can extend the tenure and pay the adjusted premium.
- You may not be eligible for new term insurance if you are over 65 when your term insurance policy expires. In such a situation, you can extend the tenure of your existing term plan and get coverage by paying the annual premium.
Ways to Extend the Term of the Policy
While buying a term insurance policy online is easy, many insurance buyers do not know if they can extend the term insurance policy’s tenure. What if you want to extend the term insurance premium tenure? You can certainly change the term insurance period in the following cases.
Converting a Term Insurance into a Regular Life Insurance policy
It is one of the best ways to extend your term insurance policy tenure. However, you can convert the policy only if you have purchased a convertible plan. Your policy document may have a clause for converting the term plan. Also, as mentioned in the policy terms and conditions, you can convert your term plan only after a specified time.
Auto-renewal of the Policy
Another situation where you can extend the term insurance period is if you have purchased a term insurance renewal plan. In this case, the policy tenure will automatically extend by a pre-decided term or until you attain a particular age.
A significant benefit of buying a renewable policy is that you can renew the same even if you are diagnosed with any critical illness during the policy period. However, you must know that if you are diagnosed with any disease, you may have to pay a higher premium after detection of the disease.
Way Forward
Extending the tenure of term insurance plan is a good way to keep your loved ones protected if you still need insurance after the initial term. Just remember, it may cost more, and you might need a health checkup. Plus, it is usually not a forever extension.
Your insurance agent can provide you with detailed information about the renewal options available for your specific term insurance plan. It is always a good idea to discuss your needs and financial situation with them before making any decisions.
In the world of insurance, flexibility is a precious thing. So, if your term insurance plan can be extended, you have more control over your financial security. And that is a reassuring thought.
Key Takeaways
- A fixed-term policy can give financial security to your loved ones in the event of your demise during its term.
- People choose term insurance because it is affordable and flexible.
- If you want to, you can extend the term or renew it with a convertible plan or renewable policy.
- Make sure to talk to your agent about what you need and how long you will need it before extending the term.
