Importance of Term Insurance Policy Renewal

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Neeta’s world was filled with love and joy. Her family included her, a son, and her loving husband. Everything was going smoothly until the outbreak of COVID-19. The second wave of COVID-19 in India snatched happiness from many houses, and Neeta was one of them. She lost her husband to COVID-19. Her husband also had a loan liability. To cover the loan, her husband had term insurance of Rs 1 crore but forgot to renew it due to his medical problems. The insurance company refused to honor the claim because of lapsation of policy.

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She has now loan liability as well as the responsibility of raising a young child.

We all take life insurance on a date and the contract is valid as per facts on date of commencement and the contract is valid for full-term provided the contract is renewed each year as per terms and conditions of the policy.

Importance of Term Insurance Policy Renewal


It is your duty to renew the contract by paying renewal premium as on a date of renewal. Ideally, you should register an ECS mandate so that renewal is debited from your account. You can use bank or card mandate. If you do not renew the policy on the given date then the Insurance Company offers you a grace period. But policy lapses after the grace period and claim will not be admissible in Term Insurance. Companies offer 90 days period to reinstate your policy but you need to understand the meaning of reinstatement.

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Policy can be reinstated within 90 days after the grace period but the case is underwritten fresh and all decarations including medical is considered as on date of reinstatement. This means that Section 45 would reapply from the date of reinstatement and suicide exclusion of one year would reapply.

To avoid reinstatement, all term insurance should be renewed within the grace period.

What is Grace Period?

A grace period is the period of time after insurance premium payment is due, but before late fees, interest, or other penalties start to accrue.

Understanding of Grace Period 

All Insurance Companies allow 30 days grace period in all modes except monthly mode where only 15 days grace period is allowed.

You must take Term Insurance in annual mode only which is most economical and allow 30 days grace period.

If you do not renew your Term Insurance then you would need a new term insurance which would come at a higher premium because your age would have changed. You would also undergo a new medical and scope of policy will be treated as fresh insurance.

Financial security is ensured

We all buy a term insurance policy to get financial security for our family, for a situation in which we are not there anymore. Nevertheless, if you do not renew your policy timely, paying premiums all these years will go all in vain. When you renew your term insurance policy, you can rest assured of the continuation of the benefits of the policy so that your family does not have to go through any kind of financial crisis in case of your untimely death.

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As you initiate to purchase a term insurance policy, the insurance company will consider your age, gender, weight, lifestyle, and many more. These details help them to determine the premium that you would be required to pay for the policy. On failing to renew your term life insurance policy, you have to go through all these again. Also, as you grow older, you may develop some health conditions which will be considered by the insurance provider. This may lead you to pay higher premiums. As you buy a term insurance policy at a younger age, you will be able to pay lower premiums.

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