Why Should You Pay Your Term Insurance Premiums On Time?
The main purpose of buying a term insurance policy is to secure your family and their future financial needs. You want to ensure your family does not struggle financially and continues to live a comfortable life in case you pass away early.
Term insurance is the purest form of life insurance. It promises to pay your family (nominees/beneficiaries) the sum assured amount in case you pass away during the policy duration. However, in order to keep this promise, the insurer requires you to pay all your premiums regularly. Depending on what is more convenient, you can pay the premiums monthly, quarterly, half-yearly, or annually.
But, what happens if you stop paying term life insurance premiums? Will the insurer cancel your term policy? How will it impact your family and their future financial needs?
In this article, let us find the answers to these questions and learn about the importance of paying your premiums on time.
What Happens if You Stop Paying Your Term Life Insurance Premiums?
Sometimes life gets busy and you may forget to pay your term insurance premium on time. In such a case, first you get a grace period of 15 to 30 days (15 days for monthly premium payment mode & 30days for all others) within which you are required to pay the due premium. If you fail to make the due premium payment again, during the grace period, your policy will lapse.
For example, you’ve purchased a term insurance plan and opted to pay the premiums on a monthly basis. Lately, you have been under a lot of stress due to work and forget to pay the monthly instalment of your term insurance premium. In such a situation, your insurer will give you a grace period of 15 days to make the required payment. If you fail to pay the premium in the extra time, there could be damages like -
👉 Loss of Term Cover
If you miss out on paying the premium for your term insurance plan, the first and foremost thing you lose is the life insurance cover that you have for your family. Your family will no longer have a reliable source of income to depend on after your death. Their financial future becomes unsecured.
👉 Difficulty In Buying A New Term Plan
If your policy ends prematurely due to failure of paying timely premiums, you always have the option of reinstating the cover in your existing policy (within 2 years from the original premium due date) or buying a new term insurance policy. However, in both cases, you would have to undergo the due diligence including medical tests, documentation, and so on - all over again.
👉 Proposal Getting Declined
Even after you undergo the entire process of buying a new term insurance plan again, there is a chance that your proposal might get declined. This could be because you might have either developed a new disease or a medical condition, etc.
👉Losing protection under Section 45
IRDA has made it mandatory for insurers to honour life insurance claims without question after the first 3 years of coverage has passed. In case of a break in term insurance or in case you buy a new term insurance plan, you essentially lose this immunity. This could mean any claim in your term insurance within the next 3 years would get thoroughly investigated leading to a delay in claim settlement & payout to your family.
What Can You Do to Prevent This?
If you do not want to undergo all these problems and want to continue securing your family and their future financial needs, then we recommend you keep these three points in mind -
- Put standing instructions on your bank account (and not on your credit/debit card).
- Keep personal reminders to check that the payment has gone through.
- Work with a credible financial advisor who'll help you keep track of your payments and the plan.
Find out the Term Insurance Plan that is right for you and your family - with Beshak TruMatch in just 5 minutes! ✅
- To maintain a term insurance plan, it is important to pay the premiums regularly.
- You can pay your premiums on a monthly, half-yearly, or annual basis.
- In case you miss out on paying your premium, your insurer will provide a grace period. The policy lapses if you fail to pay during the grace period.
- If the policy ends, you and your family could face many problems like you may lose your term cover, find it difficult to buy a new term plan, and so on.
- You must put standing instructions on your bank account and keep personal reminders to check that the payment has gone through or buy through an advisor who'll help you keep track of your payments and the plan.
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