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Ref. No. KLI/22-23/E-BB/492
Term insurance portability can provide extra protection against unreliable insurance providers. Read to find out more about portability in term insurance policies.
Buying a term plan has become an integral part of the investment portfolio for many working professionals. Term insurance offers financial protection to your family in the event of your unfortunate demise; it allows them to be financially independent even in your absence.
Over the years, term insurance has evolved significantly, and today, the modern policies offer several benefits, including the return of premium, option to cover your spouse under the same policy, etc. Another significant feature of a term insurance policy is that it has an affordable premium.
Even though term insurance policy is immensely popular among the masses, the IRDA (Insurance Regulatory and Development Authority of India) is considering a proposal to allow the transfer of term insurance policy from one insurer to another. In other words, IRDA plans to allow term insurance portability. If the plan is passed, experts believe term insurance’s popularity will increase manifold.
What is term insurance portability?
Term insurance portability is a facility wherein you can transfer the policy from one insurance provider to another without losing its benefits. Is term insurance portable?
As per the existing IRDA rules, only health insurance policies are transferable from one insurance company to the other. Term insurance portability is not allowed. Therefore, if you want to cancel your current term plan before maturity, you may have to pay cancellation charges, which could be up to 70% of the premium paid.
Term insurance portability is a condition of protecting the policyholder’s interest and promoting a fair and competitive market. If the proposal is implemented, experts believe that the insurance companies will strive hard to retain their existing customers by providing high-quality services. With term insurance portability, you may not have to be captive of the contract, and if you are not happy with the services, you can switch your policy to a better insurance provider.
Benefits of buying term insurance policy
One of the primary reasons IRDA plans to implement term insurance portability is to promote transparency in the services offered by the insurance companies. While term insurance portability is yet to become a reality, let us look at the benefits of buying a term policy.
The insurance benefit or the sum assured received by your family member in the event of your unfortunate demise during the policy period can help them take care of their regular expenses. It can also help the family meet their long-term goals like child education and marriage.
If you have any liabilities like a home loan or credit card bill, the repayment can be a huge financial burden for the family without you. They may have to sell their assets or use the savings to pay off the dues. But, if you have purchased a term insurance policy, the family can use the payout to repay the debts and keep your assets and hard-earned savings intact.
The COVID-19 infection spread has made everyone aware of the importance of robust insurance coverage to meet the medical expenses during an emergency. So, as a responsible citizen and a caretaker of the family, you must be financially prepared to deal with any medical emergency in the post-pandemic world.
The term insurance plans not only protect your family after your demise but also provide coverage against terminal illnesses and other life-threatening medical conditions. This feature pays the sum assured to the family member immediately after being diagnosed with any severe disease such as cancer or heart ailment.
Although term insurance is not portable yet, it is advisable to have a term policy in your portfolio. It is a great way to secure your family’s financial future even in your absence.
Ref. No. KLI/22-23/E-BB/2435