The number of features available in a term plan attracts the masses towards it. A term insurance policy can currently provide features like the return of premium, extra covers, whole life protection, joint plans, flexible payment modes, plan extension, coverage top-up, and much more. Among these, a term plan with return of premium is the most beneficial feature.
One such extra feature available in health insurance these days is insurance portability. Insurance portability helped several health insurance policyholders in times of need. But is this portability applicable in a term insurance policy as well? If you have this question, you can find its answer over here. So, read on carefully to know more about insurance portability and its availability in term insurance.
What is Insurance Portability?
Insurance portability is a feature the Insurance Regulatory and Development Authority in India (IRDAI) introduced in July 2011. With its help, a policyholder can change the insurer if the insurer’s support, services, or returns are unsatisfactory. Such plans also allow porting the credit earned during the continuous policy years, such as the no-claim bonus.
Insurance portability is very important due to one main reason. When earlier a policyholder did not prefer the insurer for whatsoever reason, the only option they had was to surrender the policy. Surrendering the policy mid-term had several extra costs such as surrender charges, administrative charges, penalties, and even loss of capital gained. Several people suffered losses for no fault of theirs. To avoid such troubles for the customer, IRDAI introduced portability.
How Does Insurance Portability Work?
To be applicable for insurance portability, a customer must fall within the basic criteria of the IRDAI regarding the same. Some of the essential criteria include:
- Portability is only available at the time of policy renewal.
- The policy must not have any breaks in between.
- The policyholder must make the portability request at least 45 days before the renewal date.
After falling within all these categories, the policyholder has to apply to the new insurer to which they wish to port their existing policy. The new insurer then reviews the application and underwrites a new policy similar to the existing one. There can be slight changes to the plan as the new plan will reflect any of the new insurer’s plans. And after approval and payment, they get their new policy. The new policy will have a waiting period based on the waiting period and the number of years completed in the previous policy.
Is Insurance Portability Applicable for Life Insurance?
As of now, insurance portability is only applicable to non-life insurance, health insurance in particular. So, you cannot buy a portable term insurance policy at present. The major reason behind this unavailability is that a term insurance policy has longer policy terms. It is not the case for non-life insurance, where the policyholder has to renew a policy every year. As renewal only comes every 5, 10, 15, or 20 years portability is not viable in a term insurance policy.
How to Substitute the Need for Insurance Portability in Term Insurance?
You don’t need to worry if you cannot get the insurance portability in a term insurance policy. You can substitute it through various other methods. Given below are some such methods:
- When purchasing a policy from an insurer for the first time, always take reviews from an existing customer who you know personally and not from the internet.
- In the beginning, start with policies with shorter durations.
- Keep the premium amount within the budget to avoid over-burdening your budget.
- Choose insurers with a high claim settlement ratio.
For the time being, insurance portability is not available for term insurance. But since 2017, IRDAI has been in talks to introduce this feature to term insurance. Meanwhile, to increase the benefits of term insurance, you can invest in term insurance with return of premium.