What Happens If I Do Not Pay My Premium on Time?

Nowadays, life is busy, and sometimes, you skip important things, like paying a policy premium on time. Maybe the budget was tight, you forgot the due date, or you thought “one late payment will make no difference.” Well, that can hurt. Delaying or skipping the premium payment can cause inconveniences, from loss of coverage and policy lapse to heavy penalties. 

Imagine using medical insurance at the hospital only to find out your insurance is inactive, or realise your motorcycle insurance has lapsed when you wanted to make a claim for an accident. Not a great feeling, right? Many insurance companies offer solutions to keep your policies on top. So, read this blog to understand the impact of late premium payments and how you can fix this situation. 

• Recently missed paying the premium on the due date? Do not worry — insurers generally provide a grace period. This is usually an extra time, 15 to 30 days, given by insurers to the policyholders to make the late payment of the premium without any hassle of facing penalties, ensuring your coverage stays safe.
• Whether it is health or car insurance, during this period, the policy remains active to keep you protected. The sad part? Once the grace window is over, the insurer may cancel your policy, leading to further risks and penalties. Though this period is a valuable time, it is suggested not to depend on it. Instead, this can act as a buffer in difficult times.

The profession, employment or business is often the primary forte of one family member, also considered the primary breadwinner for the family. So, if you are the primary breadwinner for your family, how do you ensure that the family has a source of income even when you are not there?

One of the ways is buying a term insurance cover for the family. In case of your untimely death, your family can receive a large sum of money. They can use this money to generate a monthly income as well as to meet their future financial goals.

However, the two challenges of investing the money in a safe instrument and tax will remain. Also, your dependents must be prudent about dividing the large sum for income and future goals.

Buying Term Life Insurance with Regular Income Option

Term insurance with a regular income option means you can decide to pay the benefit amount to your family as a monthly income. This is opposed to the usual lump sum only payout from term insurance policies.

With this option, your family can receive two different pools of money:

• Lump-sum amount to help pay off any debts and invest in the big future goals

• Another part is converted to a monthly income for the remaining policy tenure

With this option, you can completely eliminate the need for your dependents to invest the insurance proceeds for household needs. Instead, they can focus on their future and living debt-free.

Life insurers are renowned for their long-term safe investment options. After the sovereign government, life insurance companies are the only asset managers promising a guaranteed return on a 20-year investment plan.

Also, since this income is a direct payout from a life insurance policy, it is not taxable under section 10(10D) of the Income Tax Act, 1961. You can choose to make this income grow over the years by a percentage of the initial payout.

This way, the income keeps growing for the family, and they can maintain their lifestyle in the long run.

For example, with the iSelect Smart360 Term Plan byCanara HSBC Life Insurance, you can choose a level family income or opt for a 5-10% growth that will be payable for 4 years.. So, if your family starts to receive an income of ₹ 50,000 per month, it will keep growing by ₹ 2500 - ₹ 5000 every year for 4 years.

Thus, if you are salaried or have a business, the simplest way to ensure the long-term safety of your income to your family is with a regular income option of term insurance.

Conclusion

Choosing a term insurance plan with a regular income option ensures that your family receives a stable and tax-free income stream even in your absence. This approach reduces financial stress, eliminates the burden of investment decisions, and supports both daily needs and long-term planning with ease.