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Having an insurance plan has become an essential financial tool today. It acts as a cushion against the various uncertainties that can adversely affect your life. The most common type of life insurance is a term plan, in which you can get various benefits from your insurance provider. In addition to the guaranteed sum paid to your nominee, many policies now offer a range of additional benefits that can be included for enhanced protection. Options such as adding a spouse under the same plan, a refund of premiums, entire life coverage, 40 critical illnesses cover, etc., are available for you to include in your term plan.
While most plans offer cheap premiums, certain insurers may have policies that do not align with your protection goals. You can use the term insurance portability option in such a situation.
Read along to understand term insurance portability better.
Key Takeaways
Term insurance portability gives policyholders the flexibility to upgrade their plan that better aligns with their financial goals and protection needs
Portability enables you to switch insurers without losing accrued benefits such as waiting period credits, ensuring continuity of coverage and protection
Pre-existing medical conditions and past health history can significantly influence your eligibility and approval when applying for portability
A portability request typically needs to be submitted at least 45-60 days before the policy renewal date to ensure a smooth transition process
While lower premiums may seem attractive, they often come with reduced coverage features or stricter policy terms that may limit overall benefits
What is Term Insurance Portability?
Term insurance portability refers to the right you have as a policyholder to switch your insurance or insurance provider. It means you can change your insurer as per your suitability without the loss of accumulated benefits or even the paid premium amount. It allows you to move to a new insurer without losing certain continuity benefits, helping protect your interests and encouraging fair competition in the insurance market. This feature aims to prevent you from being captive to the contract.
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How to Switch Term Insurance Plans?
Switching term insurance is a planned process that involves careful steps rather than a simple transfer. Following a structured approach helps ensure continuous protection while transitioning to a new policy.
Research and Compare Plans: Begin by evaluating different term insurance options and choose a plan that better aligns with your current coverage needs, financial goals, and future responsibilities.
Apply for the New Policy First: Submit an application for the new plan while keeping your existing policy active. Maintaining this overlap is essential to avoid any gap in coverage if the new policy is delayed or declined.
Complete the Underwriting Process: The insurer will assess your application through underwriting, which may involve medical tests, income checks, and lifestyle disclosures to determine eligibility and premium.
Policy Issuance and Verification: Once approved, the new policy will be issued. Review the policy document thoroughly to confirm details such as sum assured, tenure, exclusions, and premium structure.
Discontinue the Old Policy Only After Activation: Consider cancelling or surrendering your existing policy only after the new one is fully active. Ending it earlier could leave you temporarily uninsured, which is a risk best avoided.
Is Term Insurance Portable in India?
From a regulatory perspective, term insurance in India does not offer portability in the conventional sense. The Insurance Regulatory and Development Authority of India (IRDAI) has not established any framework that permits policyholders to transfer an existing term plan from one insurer to another.
As a result, you cannot carry forward your current policy’s premium, underwriting assessment, or tenure to a new insurer. Every term plan functions as a separate contract, so when you opt for a new policy, it is issued as a fresh application and evaluated based on your present age, health condition, occupation, and lifestyle factors. However, individuals who are currently insured by a life insurance policy may switch to a different insurance company without giving up their current policy.
As of now, only health insurance plans can be moved under IRDAI regulations from one insurance provider to another. Term insurance coverage cannot be transferred. Therefore, a surrender fee must be paid if someone wants to cancel their current life insurance policy before it matures. This fee may include up to 70% of the premiums paid throughout the whole policy period.
India does not currently have any rules that permit the change from group life insurance to a personal plan regarding term plans.
What to Consider Before Porting Your Term Insurance?
Before you begin the process, it’s important to evaluate a few key aspects to ensure the switch aligns with your protection needs and financial goals. Here are the 5 things that you should tick off before purchasing your term insurance.
Medical History: If you have an existing pre-existing disease or frequent hospital visits, the new insurer may reject your portability. Generally, insurance companies ask individuals (above 45 years) to conduct medical tests. If medical reports show any conditions such as high blood pressure or diabetes, the portability request might be rejected.
Waiting Period: When you are porting your term insurance, make sure your waiting period is completed; otherwise, it might be waived off. However, if you completed the partiality, you will claim the benefits under the new policy.
Sum Insured: At the time of portability, ensure that you quote a reasonable insured amount. Applying for a high sum insured may alarm your new insurer. Let's understand with the help of an example:
Suppose you have been renewing your health insurance policy with a sum insured of ₹4 lakh for the past three years. Now, you choose to port it to another insurer and increase the sum insured to ₹5 lakh. In this case, the portable sum insured, which is the amount for which waiting periods are already completed, will be ₹4 lakh. The total sum insured under the new policy will be ₹5 lakh. However, if you are hospitalised for a pre-existing illness during the waiting period with the new insurer, you will be eligible for coverage up to ₹4 lakh only. The additional ₹1 lakh will be available after you complete the waiting period for the increased amount.
Age-Related Challenges: As health deteriorates, many insurers are afraid to approve portability requests from senior citizens. The new insurer that accepts may impose a higher premium, including a co-payment clause, making the policy more expensive.
Premium Vs. Coverage: Many people consider porting their health insurance policy to enjoy lower premiums. However, due to lower premiums, insurers often compromise on coverage. Over time, this limited coverage may not meet your healthcare needs, leading to higher out-of-pocket expenses. Therefore, before porting your policy for a lower premium, always review the extent of coverage provided to ensure it aligns with your long-term health requirements.
Did You Know?
IRDAI mandates a 15-day free-look period for life insurance policies, allowing you to cancel the plan if terms don’t suit you
Source: IRDAI
Alternatives to Porting Term Insurance
Since term insurance portability is not currently permitted in India, you may explore other practical options if you wish to adjust or improve your coverage:
Purchase a New Term Plan: One option is to buy a new term insurance policy from another insurer while continuing your existing one. This allows you to maintain uninterrupted protection and even increase your overall life cover. However, before proceeding, evaluate premium commitments, underwriting requirements, and your long-term affordability.
Adjust Your Existing Policy: Instead of switching insurers, you can enhance your current coverage by adding riders such as critical illness, accidental death, or waiver of premium benefits. At renewal, you may also remove features that are no longer necessary to optimise costs. This approach helps customise your plan without needing to consider term plan portability.
Surrender or Discontinue the Current Plan: You may choose to cancel your existing policy if it no longer aligns with your needs. However, weigh the pros and cons carefully, especially surrender charges or the potential loss of benefits. Most importantly, ensure your new policy is active before discontinuing the old one to avoid any gap in life cover. Using a term insurance calculator can help you compare costs and make an informed financial decision.
Conclusion
Although term plan portability is a good option that gives you flexibility among various options, it is not available in India yet. Thus, it is very important to be sure of the type of term plan you buy. Financial emergencies should not make your family go bankrupt and seek help from relatives after you. Purchase the appropriate term insurance plan because it is essential and can help you reduce your tax liability as well.
Since term insurance portability is not currently permitted, choosing the right insurer, adequate sum assured, suitable tenure, and relevant riders at the time of purchase becomes even more crucial. If you ever feel the need to switch, the only practical route is to buy a new policy after carefully comparing features, claim settlement ratios, exclusions, and premium structures. Taking a well-informed decision today ensures long-term financial security, uninterrupted protection for your loved ones, and complete peace of mind.
Glossary
Term Insurance: A life insurance policy that offers financial coverage for a fixed period in exchange for regular premium payments
Sum Insured: The total amount an insurer agrees to pay upon claim, based on the terms of your insurance policy
Pre-existing Disease: A health condition that existed before buying the insurance policy or switching to a new insurer
Waiting Period: Period during which certain illnesses or benefits are not covered after buying or porting a policy
Insurance portability could be good for you as it allows you to avail a better policy without affecting your waiting period. It can be very useful when you realise that the terms of your policy are not the best for you, and you might get better offers elsewhere.
IRDAI gives you the right to port your policy to any other insurer of your choice, allowing you legal flexibility. The rule states that your new insurer “shall allow for credit gained by the insured for a pre-existing condition(s) in terms of waiting period.”
No. Term insurance portability is not allowed under current IRDAI regulations. If you want to change insurers, you must buy a new policy and then cancel the existing one.
You cannot directly switch or port your existing term insurance policy to another company. However, you can purchase a new term plan from another insurer at any time. The new policy will be treated as a fresh application and will require underwriting.
Term insurance cannot be ported in India, so waiting periods related to portability do not apply. When buying a new term plan, standard policy conditions such as suicide clauses and exclusions will apply as per the insurer’s terms.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
