One of the major reasons for poor adoption of term insurance is the apprehension that the policy will lapse in case one is unable to pay the premium on time. To address this fear, life insurance companies are now offering premium holiday rider and premium delay rider.
The premium holiday rider can be selected at the time of purchasing the term plan by paying an additional premium. In case the policyholder is unable to pay the premium in any year, the rider gets activated and the policy does not lapse.
The policyholder can resume paying the premium the following year, along with the premium for the missed year, without incurring any additional fees or penalties. One can select this feature in the policy for up to three years. The premium holiday rider raises the premium cost by around 5%.
Safety net
This feature acts as a safety net in the year the policyholder is unable to pay the premium. “It provides a financial cushion, letting you manage short-term financial challenges without sacrificing your insurance coverage,” says Rhishabh Garg, head, Term Insurance, Policybazaar.com.
The rider can be beneficial during periods of financial difficulty, such as job loss or unexpected expenses. “By offering a premium holiday, insurers can retain customers who may otherwise allow their policies to lapse due to temporary financial constraints. This helps maintain the customer base and prevents policy lapses,” says Sharad Bajaj, chief operating officer, InsuranceDekho.
