If you have to pick between planning today and planning tomorrow, planning today is always the better option. Putting a strategy in place ahead of time, such as purchasing a life insurance policy from a young age, will provide you with a significant amount of coverage in the long term. Purchasing insurance protects you from the uncertainties of life.
Long-term and methodical wealth creation can provide you with sufficient assets to let you live comfortably in your golden years, manage your children’s higher education and marriage, and create financial liquidity for emergencies. Only after the strategy meets your needs comfortably will you recognize its genuine value. Your future self will appreciate you for it in such a situation. Here’s why life insurance is so important, and what happens if you don’t pay your life insurance premiums.
How Life Insurance Policies Can Safeguard Life’s Certainties
There are many possibilities in life insurance to meet each of your financial needs and goals, just as you have diverse financial demands and goals. You can select a policy that offers a combination option, i.e., a single solution that combines two or more life insurance plans, such as life insurance and investment. Alternatively, you could opt for a “Do It Yourself” (DIY) insurance, in which you select the policy that best meets your needs and purchase it online after researching its features, advantages, costs, tenure, and riders.
Life insurance policies can be purchased as standalone protection devices or as part of a regular savings plan that includes a life insurance component.
1. Pure protection plans safeguard you from losing future earnings in the event of death or disability. These can also be purchased with built-in add-on benefits or riders that provide additional coverage for incidents such as accidental death and critical sickness.
2. A regular savings plan with a life insurance policy that helps you save for a specific goal in a systematic and periodic manner. Depending on your risk tolerance, you can save money in a variety of ways:
- Guaranteed savings, where you get a set amount when you reach a certain age or die.
- Savings with annual returns (as a bonus) dependent on the performance of the company; once declared, the bonus is paid at policy maturity or death.
- Savings with debt and equity market assets, such as unit-linked insurance plans (ULIP), where returns might be high or low depending on market performance.
- Is it possible for me to pay the premium for the complete policy term?
- Which is more practical: a single premium payment or payments made monthly, quarterly, or annually?
- Will I lose the money I invested if I have to cancel the insurance before it matures for any reason?
- How much will they pay me back if I’m entitled to a payment, and will it assist me in achieving my objectives?
| Policy | Ideal For | What you get when you pay the premium | What you lose when you stop premium payment | How to reinstate the policy |
|---|
Pure Protection through Term Plan _____ Individuals who want to protect their future earning potential |
Assured us security for the family in case of the holder’s premature demise | The coverage stops, which could derail the family financially, in case of the holder’s early demise |
|
| Regular Savings and a Life Cover with Traditional Endowment _____ People who want to save, invest, and grow their money without worrying about market volatility |
|
Further accrual of bonus/ active life cover/ guaranteed returns or cash backs |
|
| Regular Savings, Investments, and a Life Cover through ULIP _____
|
|
Benefit of:
|
|
| Regular Savings with guaranteed fixed amount on maturity in the form of Pension _____ People who want a fixed source of income or lumpsum amount to help them tide over their retirement years |
At the end of the plan, it is advisable to buy annuity from the complete accumulated corpus to get the assurance of fixed regular income post retirement |
|
Can be revived during the specified revival period |
It’s Always Rewarding to Pay Premiums
When you pay your premiums on time, you will benefit from the following:
Your family and you are financially secure in the long run.
The objectives for which you have set aside funds will be realized.
Positive market movement is an advantage of some plans, such as ULIPs.
Life insurance is the only investment vehicle that combines equity and debt in a single product while also allowing you to select between fund options.
In long-term plans, the returns are likely to outperform inflation.
After five years, partial withdrawals from ULIPs are available, which can come in useful for unforeseen needs or crises.
Some policies provide tax advantages.
For classic (participating) plans, bonus accumulation increases the corpus.
Insurance Companies Can Assist in a Variety of Ways
There could be a variety of reasons for the cancellation of premiums. It’s possible that you’ll run out of money after you retire. A medical emergency, on the other hand, could deplete the usual income. Even though the premium payment period is short, you must continue to pay premiums since you have made a financial commitment to allow the policy’s benefits to accrue for you.
Insurance companies, fortunately, provide assistance to ensure that your premium payments are not affected.
- Changing the Payment Mode: If sticking to the policy’s payment schedule becomes difficult, you can change the payment mode. IRDAI permits customers to pay premiums in advance if they believe paying them later will be problematic, particularly as they approach retirement.
- Policy Reinstatement: If a premium is missed, all firms have a revival feature. There is a clear procedure here, which includes the payment of lapsed premiums as well as a revival fee. Because IRDAI recognizes the necessity of maintaining an insurance policy, they have recently increased the revival time to 3 years (for ULIPs) and 5 years (for conventional).
- Medical Exam: An dormant policy can be reactivated with minimal paperwork. A medical examination may be required in some situations to reinstate the policy’s original benefits.
- Easy Loan Facility: A loan might help you get out of a financial bind. This will ensure policy consistency. Some plans allow you to take out a loan against them even if you have missed payments; you can use this to pay the premium for a small fee. A Loan Cum Revival Scheme is also offered by some businesses.
- Companies also accept partial withdrawals from ULIPs to cover renewal charges and prolong the benefits of your insurance after the 5-year period has passed.
- Pay in Instalments: Some firms offer extra revive options in which a customer who is unable to pay all pending premiums in one go can pay in instalments.