What If I Don’t Renew My Life Insurance Plan?
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Life insurance policies require the insured to pay a small premium to the insurer to cover them under life insurance. If the insured fails to pay the premium as applied, then he is considered uninsured and the coverage offered by the insurance company will be taken back. Every insurance company offers a grace period of 30 days to pay the premium without any penalty. But if the individual fails to pay the premium even after the grace period, then the policy will be deemed to have lapsed. And he will not get any benefits as assured by the policy.
Do Read: Benefits of Buying Life Insurance Policy
What Happens if Life Insurance Plan Is Not Renewed?
If the life insurance policy is not renewed, then the policyholder cannot enjoy any benefits of the policy. Renewal of the existing policy is better than buying a new policy and even the insurers will not ask for any medical tests before renewal. The only criteria that are required for the renewal of a policy are that the insurer should fall within the permissible age brackets. The disadvantages of not renewing the life insurance premiums are as follows:
1. Loss of Insurance Coverage
Renewing the premiums will keep the policy thriving and in case of any eventuality, this insurance policy will stand for the beneficiary. The policyholder will also be able to enjoy the stipulated sum assured. Thus, the sole purpose of safeguarding the financial future of the dependants is lost.
2. Future Renewal Becomes Relatively Expensive
If the premium terminates, owing to the non-renewal of the policy, and the policyholder wishes to renew it, then it has to undergo complete medical examinations and may also be required to pay additional interest as a penalty.
Also: How Easy Is It to Buy Life Insurance?
What To Do If I Am Not Able to Renew My Life Insurance Plan?
If the policy lapses, owing to non-payment of premium, then the policyholder has to act quickly, to avail the benefits of reinstatement. They should also contact the agent immediately for advice. Alternatively, they can also contact the insurance company for further processing of reinstatement.
Most of the policies can be reinstated even after lapsing, but with the payment of premiums for the lapsed period. The insurer will also levy a penalty, which is generally the interest on those missed premiums at the rate of 12-18% as a penalty. The insured will also have to submit a proof for continuing the policy. But in most cases, the penalty levied will be very heavy, that the insured tend to think that seeking a new policy is better than renewing the existing one.
Check: All About Life Insurance Companies in India
Bottom Line
Instead of thinking about what to do if one can’t renew insurance premium, the best thing to do is to pay the premiums regularly. All major life insurance carriers offer the option of automatically drafting payments from the account of the policy holder, to pay the policy every month on time. Such a feature will remove the need to think about life insurance premium every time and prevent it from lapsing.
