What happens to Term Life Insurance if you don’t die?

What is Term Insurance?

 

A term insurance plan or a term plan is a type of life insurance plan which provides cover to the policyholder only for a specific period of time. Since protection is offered for a specific time period, these plans are also known as protection plans. Provided the policy is in force and all successive premiums have been paid, if something happens to the policyholder, the policy will provide death benefits to the mentioned nominees/beneficiaries. Term insurance plans are comparatively cheaper as compared to life plans and come with affordable premium rates. The purpose of a term plan is to provide a protection cover at affordable premium rates.

 

Having a term insurance is not a bad decision. It is less expensive and provides reasonable cover for you and your family for a particular time period. Let’s assume that you have held a term plan for 10-20 years, but now the term insurance policy is coming to an end! What will you do now? Read ahead and know more.

 

When a term plan expires and you outlive the term, the policy is subject to an exit status and cover is no longer is provided to the policyholder.

 

 

Five options to consider if you have outlived your Term Plan

 

Renew the Term Plan - Life insurance companies base the premium rate on the risk. The closer you are to being a senior citizen, the greater the risk of death. Renewal of your expired policy is a good option. Although you will have to pay higher premiums, you/your family will be covered all over again. Many term plans come with the option of auto renewal. If you select this option during the time of purchasing the term insurance policy, you will be entitled to a discount upon renewal.

 

Buy a New Term Plan - If you are under the age of 65 years, you can opt for buying a new plan. This will be less expensive in comparison to policy renewal. At this age, most of your children are well settled. This will help you make a better decision for your retirement that might be just around the corner.

 

Convert to permanent life plan - Only a few insurers allow you to convert your term plan into a permanent life insurance plan. If this option is available, it is a good idea to do so when buying term life plan in the first place. Most insurance providers let you convert term life insurance plan into permanent life without going through a medical exam or check-up. But, this is applicable only at a certain age, (in this case it is the age of 65 or 70 years). It is ideal if you choose a term plan for the first 20 years of your life, then convert it into a life plan till you reach retirement.

 

Don’t continue at all - Dropping the policy completely should be your last option. This should only be taken into consideration if you have sufficient funds to take care of yourself and family over the retirement years.

 

Buy a term plan with survival/maturity benefits - Not all term insurance plans come with the option of converting it into a permanent life plan. However, there are many term plans which come with survival benefits. Survival benefits are the benefits payable in case the policyholder survives the policy term and has successfully made all the premium payments. This is an amount payable at the end of the term insurance policy, it comprises of:

 

  1. Fund Value/Accrued Bonus/Guaranteed Additions OR
  2. Sum Assured OR
  3. Return on Investment

 

 

Insurance Plans with Survival Benefits

 

Mentioned below are a few term plans which come with survival benefits.

 

ICICI Prudential Life Guard Return of Premium

 

 

 

 

As the policy matures, the policyholder will receive all the premiums invested on survival.

AEGON Life iReturn Insurance Plan

Shriram Life Cash Back Term Plan

Tata AIA Life Insurance iRaksha Trop

Aviva i Shield
Plan

Return of premium (110% of total premiums paid as survival benefits and guaranteed money back on maturity)

 

 

Features of Term Insurance Plans with Survival Benefits

 

Criteria

Description

Free-look period

15 days for manual purchase of policy

30 days for online purchase of policy

Age at Entry

Minimum entry age:18 years

Maximum entry age: 65 years

Policy Term

5 years - Min

30 to 35 years - Max

Age at Maturity

25 year/ 65 years/ 75 years/99 years

Grace Period

15 to 30 days

Sum Assured

Yes, depends on different policies

Policy Coverage

Death/Maturity/Survival Benefits

PPT (Premium Paying Term)

Single/Limited/Regular Pay

Nomination

Yes

Premium

Depends on the age and selected sum assured

 

 

Benefits of Term Insurance Plans with Survival Benefits

 

  1. Death Benefit - This is the amount payable to the mentioned nominee/beneficiary of the policyholder. In case something was to happen to you in the near future, your family will receive the entire amount as death benefit.

 

  1. Tax Benefits - Premiums paid towards term insurance plans are eligible for tax benefits as per Section 80C of Income Tax Act, 1961.

 

  1. Maturity/Survival Benefits - In case you outlive your term insurance plan, you will be entitled to maturity/survival benefits.

 

  1. Rider Options - You can enhance your term cover with additional rider add-ons such as critical illness rider, accidental death/disability cover.

 

  1. Optional Benefits - These include Guaranteed Additions and Accrued Bonuses.

 

Get the Right Term Insurance

 

It is advisable that a policyholder has thorough understanding of the policy provisions. Last minute decisions do not make the cut. Don’t wait till your policy expires, start examining the policy at least 6 months before the policy expires.

 

Re-assessment is critical. You need to re-assess the current need of death coverage for yourself and family. This will help you choose the right kind of product with the best rider options or moneyback guarantee. Another important factor is price. Since you are no longer at the age at which the policy was purchased, you will have to pay a higher premium for life cover.

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