Investing is based on the returns you get. Hence, when selecting the right option to put your money in, the biggest question is how likely you are to get something in return. Spending money on something should have a guaranteed benefit.Following this logic, a term insurance policy proves to be a goodoption to invest money in. The policy offers you peace-of-mind regarding your family’s financial future. This helps you manage your financial responsibilities better and live in the moment without compromising on the future.
However, taking care of the term insurance policy is also a major financial responsibility. This involves paying your premium on time and getting renewals done. Failure to do so means that your policy gets lapsed. With a term policy, lapsing is the last thing you want. Here are few reasons why you should avoid letting your policy lapse:
- Lack of security
Life is unpredictable. There is no telling when, where, or how something will happen. For this reason, you buy term insurance coverage; to make sure that in case anything bad happens to you, it does not affect the one’s dependent on you. Hence, as long as your coverage is active, you don’t have to worry about anything. But, in case your insurance policy lapses, any incident that happens will not be covered. Hence, the main reason for buying term insurance remains unfulfilled. Therefore, it is important to pay your premium and keep your term plan active.
- Medical testing
Most insurance providers make it compulsory for buyers to go through a range of medical tests at the time of buying a term policy. No such tests are needed at the time of renewal. However, if your policy lapses, there are two things that happen. Firstly, you are uninsured in case of any mishap. Secondly, if you buy a new policy after the old one lapses, you will have to go through a new series of medical tests. Thus, it is important that you do not let your policy lapse.
- Higher cost
Simply put, if your policy lapses, you will have to buy a new one. While buying a new policy, an insurance provider will take your age, medical history, lifestyle, etc. into account before selling you the policy. Based on these factors, the insurer will decide the ideal premium amount for you. The older you are, the more premium you would have to pay for your policy. Renewing your policy before it lapses keeps that from happening. Once you buy term insurance at a young age, your premiums remain the same as long as you keep renewing your policy.
- No tax benefits
Term insurance’s primary benefit is that it covers your family in the case of your death. However, that is not the only benefit that it offers. If you are the one that pays for the policy, there should be some benefit available for you as well. Hence, the best benefit that a term insurance policy offers you is tax deductions. Just like various other types of life insurance plans, term insurance also has the provision of tax benefits. However, the tax benefit that term insurance offers is different from other types of insurance. In term insurance, you can claim a tax deduction of around ₹1,50,000 in one policy year.
This means that where you spend a small amount of money on term insurance premium, you are also saving money with tax deductions. This allows you a free hand to spend more openly on yourself and your family, knowing that they are covered financially in case of your death.