Is a Term Insurance Policy Portable?

Written by : Knowledge Centre Team

2024-01-01

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Table of Content

0 1

Understanding a Term Plan Portability

0 2

How Does Portability Work?

0 3

Benefits of Term Insurance Portability

0 4

How to Port a Term Plan? A Stepwise Guid

0 5

Term Insurance Portability in India

0 6

Conclusion

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 offered after you to your nominee, there are now numerous benefits that can be included in the same policy.

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.

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. All those benefits and paid amounts are carried forward in the new plan. It can help protect your interests and encourage a fair and competitive market. This feature aims to prevent you from being "captive" to the contract.

How Does Term Insurance Portability Work?

Term insurance portability permits you to maintain coverage even if your insurer's benefits change. For instance, your benefits may change if you quit work, your spouse's coverage ends, you get separated, or your insurer lowers the coverage. These things are referred to as "triggering events."

If you switch your insurance, you'll receive a renewable term insurance policy that will last as long as you make premium payments or until you reach the maximum age limit defined by the insurer. Depending on the alternatives offered by your insurer, you can pay your premiums annually or as per the frequencies available with the life insurer.

Benefits of Term Insurance Portability

Putting the policyholders’ interests first, IRDAI has suggested introducing a protective measure that increases their flexibility in choosing a plan best suited for them. Portability gives the policyholders an option to switch from their insurer and explore better offers. The following are some potential advantages of purchasing a portable term insurance policy:

Financial security for your dependents: The insurance money may take care of something as basic as your family's monthly expenses in your absence. Your family can consider fulfilling other significant goals, like further education and weddings, with the financial support they get from the term plan after you. Portability will help you keep the accrued sum gathered over the years.
Seamless coverage for medical contingencies: Every household should be prepared for medical emergencies. Some term insurance policies offer protection for terminal illnesses and other life-threatening medical conditions. Canara HSBC Life Insurance Young Term Plan offers coverage against 40 listed critical illnesses to help you financially in case you are diagnosed with any of the terminal diseases. With the portability option, you are also eligible to customize the new policy as per your suitability.
Protection for your assets: Mortgages you take out while you're healthy could cost your family a lot of money in your absence. with a portable term insurance plan, your family can be assured that your debts will be paid off without having to sell any family assets or accrued wealth.

How to Port a Term Insurance Policy?

Any policyholder may request the transfer of their current term insurance plan as long as it is maintained and premiums are paid for immediately. Here is a stepwise guide on how you can port your term insurance policy:

Step 1: Submit a written request to your insurer regarding portability at least 45 days before the policy renewal date.

Step 2: The submission will be followed by some paperwork, which includes a portability form and a proposal form from the new insurer.

Step 3: There will be a verification request between the new and the former insurer for your medical records and other crucial information shared with the old insurer.

Step 4: Upon receiving such a request, the former insurer needs to provide all the pertinent information to IRDA India.

Step 5: After they have all the information they need regarding your insurance, the new insurers will determine if a new policy should be provided to you or not. This process is referred to as policy underwriting. if they decide to go ahead, they have to provide you with a new policy within 15 days.

Step 6: A portability certificate will be issued by the new insurer once both insurers are through with the comparison of their policy terms.

Term Insurance Portability in India

A proposal to provide portability from one life insurance plan to another is being considered by the Insurance Regulatory and Development Authority of India (IRDAI), the statutory body responsible for overseeing the insurance industry in India. This implies that those 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.

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.

FAQs

Insurance portability could be good for you as it allows you to avail a better policy without even 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.”