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Is a term insurance policy portable?

dateKnowledge Centre Team dateApril 08, 2021 views212 Views
Is a term insurance policy portable?

Getting a term plan has become a vital part of investment for many working professionals. Such a policy offers you financial protection when things go awry. All insurance companies offer term plans that come with benefits like option to cover spouse in the same policy, return of premiums, whole life cover, etc. While the premiums are affordable for most of the plans, some insurers may have rules that may not suit your conditions. In such a situation, you can utilize the term plan portability option.

What is term plan portability?

Term plan portability is a concept in which the insurer (including family cover) is guaranteed the right to transfer the insured’s debt in terms of existing conditions to another insurance provider, provided the previous policy is retained without leave.

Life insurance portability is a condition of protecting the interests of customers and can promote a fair and competitive market. If used, insurers will redouble their efforts to keep existing customers with a good quality of service and payment of requests. It can result in the introduction of simple and competitive products.

Portability, however, is only possible for products with a time limit between premium receipt and benefit payments. Due to the short-term agreement, the coverage applies well to general insurance, temporary health insurance, and group life insurance (protection products), where the policy can be added to other insurance annually. Individual members under a group insurance policy may carry the coverage of each policy as well.

The objective of the portability feature would be to ensure that life insurance - even though it has many technical issues and is designed as a long-term product - does not hold the policyholder ‘captive’ of the contract. Having the liberty to switch to a better and more reliable insurance provider can be liberating to an insurance customer.

Benefits of term plan portability as opposed to conversions

Converting your term insurance plan can have detrimental effects and even an increase in debt, which is not the case when it comes to term plans portability. However, you will receive only limited get policy coverage (if the period was 30 years and you have been working for the company for 15 years, this coverage will only be valid for another 15 years).

The premiums for applying for your life insurance policy will be lower than if you decide to change it. However, they will increase as you grow older. Additionally, there may be a policy age limit, and once you exceed that age limit, you will not be able to renew it.

If you decide to turn your policy into a life insurance policy, premiums will be very expensive. However, you will continue to receive payment until you die, as long as you continue to pay the premiums. If you are not sure which option to choose, talk to a reputable insurance agent. Together, you can evaluate your individual needs and your existing group insurance policy to determine if converting or modifying your policy can help you.

Life insurance portability in term plans India

Insurance Regulatory and Development Authority of India (IRDA), India’s leading insurance regulator, is considering a proposal to allow transfer from one life insurance plan to another. This will allow term plan portability so that people covered under an existing life insurance policy can switch to another insurance provider without having to submit their existing policy.

The question arises as to whether the transition from a group insurance scheme to an individual plan is possible. Currently, when it comes to term plans, India has no provisions that allow for the transition from group life insurance to an individual plan.

Under current IRDAI rules, only health insurance plans can be transferred from one insurance provider to another. Transfer of life insurance is not allowed. Therefore, if a person wishes to cancel the current life insurance policy before the plan matures, they must pay a donation.

These charges may be up to 70% of the premiums paid during the entire policy period. If the transfer of life insurance from one insurer to another is allowed, it will save policyholders the cost of volunteering while changing their policies.

Benefits of purchasing a portable term insurance policy

Portability safeguards the interests of the customer and IRDAI has considered introducing this option to improve customer choice. It promotes transparency as customers are allowed to switch easily from one life insurance provider to another without much hassle. Here are some of the possible benefits of buying a portable term insurance policy:

  • Financial security for your dependents

    The insurance money can ensure that your family’s monthly expenses are met after your demise, and important goals such as your child’s education and marriage are taken care of in your absence.

  • Protection for your assets

    Mortgages that you take when in good health can be a huge liability for your family in the unfortunate event of your death. An assured death benefit can make sure that your family can pay off your debts

  • Coverage for medical contingencies

    In a post-pandemic world, every family should be ready for medical emergencies. Some term insurance plans not only protect your family after death but also provide coverage for terminal illnesses and other threatening medical situations. This feature pays for the diagnosis of certain serious illnesses such as cancer or heart disease.

The main benefit of a portable portfolio is to extend the waiting times from the previous policy. Life insurance products do not usually consider existing diseases. The only waiting period is in the case of suicide, which applies to the first year of the policy.

Purchasing a portable term insurance plan in India is a great way to diversify your financial portfolio and secure the future of your family. With the right information on the policies and their portability, you can ensure your loved ones are cared for even after your time.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to Ask while Buying a Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
  9. 9. Does the term insurance plan have a cash value if you decide to cancel the policy?
  10. 10. Under what circumstances can a term insurance plan be cancelled?
  11. 11. Can I pay the premiums online or make electronic payments?
  12. 12. What will happen to the term plan if the life assured starts smoking after purchasing the policy?
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