When you buy a term life insurance policy, you must be aware of the rules and regulations. Read on to know more about it.
A term insurance policy is a must-have investment to secure the financial future of your family. It provides financial protection to the family in the event of any unforeseen event like your untimely demise within the policy period. As a beneficiary, your family member, be it wife, or children can receive a lump sum amount from the insurance company as a death benefit. Even though the term plans are known to be the most affordable insurance plans, it is advisable that before you buy a plan, you understand the terms and conditions and the policy-related rules.
Knowing precisely what risks are covered under the and what are the exclusions beforehand can help you take an informed buying decision. Also, it helps the family members avoid unnecessary surprises during the claim settlement process while they are already under stress. Let us look at some of the modern rules of term plans.
- It is a general belief among people that once they purchase a purchase term, they cannot convert to any other traditional plan. But, according to IRDA rules, you can convert your term plan to any other traditional life insurance plan like whole insurance or an endowment plan at any time during the policy period without paying any additional charges.
- One of the important term plan-related rules that everyone must know is that if you have purchased a policy for 15 years, but are unable to afford the premium, you can surrender the policy before maturity. However, if you surrender the policy within five years from the date of policy purchase, the insurer will levy a surrender charge. On the other hand, if you surrender after five years, no surrender charges are applicable.
- People who have the habit of smoking or chewing tobacco products can purchase a term insurance policy. However, you must know that if you are a smoker, chances are high that the insurer will levy a high premium. But, if you have quit smoking and stayed clean for a specific period, you may get a discount on the premium.
- A lot of term insurance policy holders have one common query, i.e., what happens to their policy if they miss paying the premium? Well, as per the rules, if you miss paying the premium, the insurer generally offers a grace period of 15-30 days, and if you pay the premium within this period, you can avoid paying the penalty. But, if you miss paying the premium for more than 3-6 months, your policy may be suspended on the grounds of non-payment of premium. In such cases, you can pay the entire premium along with the late fees and reactivate the policy.
- All term insurance policies have certain permanent exclusions where the insurer does not cover death due to following reasons – suicide, self-inflected injury, drug abuse, consumption of narcotics substance, sexually transmitted diseases, death due to involvement in illegal or criminal activities like riots, etc.
Now that you are aware of the term plan rules, make sure that you comply with them to avoid any legal issues.