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What Happens If You Outlive Your Term Life Insurance Policy?

Term life, as the name suggests, is for a particular period. Unlike whole life insurance plans, term life insurance is only for a particular time, say, 10, 20, 30, or 40 years or so. This means if the insured dies an untimely death during the policy tenure, his/her family is provided with financial coverage and other benefits under the policy.

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However, what happens if the insured survives the policy tenure? Will he/she get the premium paid amount back? Will the money lapse? Can the policy be extended? In this article, we will get a perspective as to what happens at the end of a term life insurance policy if the policyholder outlives the policy tenure and more.

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What is Term Insurance?

Term insurance is the purest form of insurance that you can buy for yourself and secure the future of your family after your untimely demise. It is a life insurance policy that provides financial coverage to the nominee if the life insured dies untimely during the policy tenure.

Among all the life insurance policies, Term insurance offers the highest coverage with minimal premiums. Some term insurance providers also cover the partial or permanent disabilities of the insured. 

What Happens To Term Life Insurance If you don’t die?

Let’s understand what will happened when a policyholder outlives the term plan:

As we all know by now, term insurance is for a certain period. The idea behind purchasing term insurance is to secure your loved ones after your death with the amount that you had signed for while purchasing the term insurance policy, also known as sum assured. It is often purchased keeping in mind that the dependents will grow and be financially independent by the time the policy expires. But this is not the case all the time.

Generally, when the policy tenure of the term insurance ends, nothing happens.

So ideally,

If the policyholder dies/doesn’t outlive term life insurance:

  • Policy coverage along with benefits is paid out to the nominee

If the policyholder survives/outlives term life insurance:

  • Nothing is paid out

However there is an option of term insurance plan with return of premium (TROP). In such a plan, if you happen to oulive the policy tenure, all the premium amounts will be paid back to you (minus GST). This simply means, if you survive the policy tenure, the premium amounts will be refunded.

What to Do if Your Term Plan is Expiring?

You will have the following options if your plan is still active and has not reached the end of its policy term. It is always best to plan at least before a year. Following are some steps to consider:

Apart from this, if the policyholder survives, nothing is paid out unless you take the following steps in advance

  1. Extend Your Coverage

    Many term insurance policies come with the option of guaranteed renewability. Renewing the policy is a smart choice if the insured is not keeping well. Coverage will be guaranteed but by paying higher rates.

    If one outlives their policy tenure, the payout is canceled. However, through the Return Of Premium (ROP) benefit, you can get back your premiums but higher charges are levied compared to your normal term insurance policy.

  2. Convert Term to Permanent Policy

    Many term insurance policies come with a conversion option. The conversion lets you change your term insurance plan to a permanent policy. Different insurance companies have different rules and policies when it comes to conversion.

    If you have good savings and can afford the premiums further, then conversion of policy can be a good choice.

  3. Buy New Policy

    If you are in good health and active, then buying a new policy is a better option than converting to a permanent policy any day. It would cost much less than conversion and you can opt for a policy suitable for your family’s needs.

    Buying a new policy will require you to go through every process you once went through while buying your term insurance policy. Medical tests, checking medical history, etc. will be required while buying a new policy.

  4. Drop Your Life Insurance

    Not a very wise decision to make but in case you have managed to save enough for yourself and your family over a while, then dropping off your life insurance can be an option.

    Dropping off should only be taken into consideration if you have saved enough and are sure that your family will be able to survive when you are no longer there to look out for them.

  5. Long Term Protection

    Term Life Insurance provides long term coverage, i.e. until the age of 99-100 years, which provides lifelong protection. In this way, you can be assured that your loved ones are financially protected for a longer period of time.

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Benefits Of Term Insurance

Here are some key features of term insurance that will help you get a better understanding of the plan and help you choose it wisely.

  1. Easy To Understand Than Other Policy Plans

    Buying a term plan is comparatively more convenient and affordable than any other life insurance plan. The framework of the term plan is comparatively very easy. There are no deep clauses or terms and conditions when term insurance is involved. It is an easy, hassle-free, and simple plan as there are no investments or saving clauses involved. One needs to pay the premiums on time and the insurance provides cover and benefits during that duration.

  2. Easy To Cancel

    As easy as to start, it can be canceled as well. As there are no investment or maturity benefits involved in the plan, it is easy to stop anytime you want.

  3. Lower Premium

    Out of various life insurance plans, the premiums of a term plan are the lowest. As there are no high investment components involved, term insurance is available at very affordable premium rates as per your annual income and age.

  4. Higher Sum Assured

    Term insurance is a type of life insurance plan where at a very minimal premium you can get high coverages. If you choose the correct insurance plan, your loved one will surely benefit from it when you are not there.

  5. Financial Security

    It is big-time financial security for your loved ones once you are not around to look after them anymore. It provides financial protection to the family and takes care of the liabilities in your absence. Don’t hesitate to buy it for your family’s better future when you are not around.

  6. Customizable

    The policy period, premium payment options (can be annually, monthly, lump-sum), and coverage depends on you. You can customize your term plan according to your suitability.

  7. Critical Illness Coverage

    We know that the treatment of expenses incurred during a critical illness can be exhausting physically, mentally, and most important financially. As the critical illness in life is not predictable, a term insurance plan works wonders during this testing time. It is highly recommended to avail of critical illness coverage benefit in your term plan, as you never know what lies in the future. 

  8. Ultimate Tax Benefits

    All the premiums you pay are tax-exempted under Section 80C. With critical illness cover, you can also avail additional tax benefits*.

    * Tax benefit is subject to changes in tax laws

  9. Rider Benefits

    Riders strengthen the term insurance policy by providing multiple additional benefits. There are mainly six types of riders under a general term insurance plan

    • Accelerated Death Benefit Add-On

    • Accidental Death Benefit Add-On

    • Critical Illness Benefit Add-On

    • Accidental Disability Benefit Add-On

    • Waiver of Premium Add-On

Summing It Up

If your term insurance policy is about to expire soon then there are many options as to how you can continue with your ongoing policy. The features, benefits, additional benefit options, etc. are mentioned above so that you can make an informed decision. Options to discontinue are also available if you think you have enough corpus to support your family.

The choice is up to you whether you want to continue or not with the policy. So, make a wise decision keeping your family and their needs in mind.

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