Payment Mandate in Term Insurance
Payment mandate ensures timely payment of premiums in term insurance, providing financial security to your loved ones.
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Life Insurance helps you secure your family's financial future in case of your death. If you choose to buy a Term Life Insurance policy, you will be covered for a specific period of time. In order for your family to receive the benefits of your insurance policy, you will need to pay your premiums within this term. If you miss a payment, your beneficiaries won't get their payouts. A great feature of this plan is that it offers a Payment Mandate that allows you to set up auto payment for your premiums. In this article, we explore what Term Life Insurance Payment Mandates are, the types of premium payments available, and the documents you'll need to get started.
What is a Payment Mandate in Term Life Insurance?
A Payment Mandate is a contract which says that you approve auto-debits from your bank towards your premium payment regularly. These are a useful way to make sure that you pay your premiums fully, and on time so that your loved ones benefit from the amount.
Since a Term Plan is for a set period of time, you will need to pay your premiums on time within this term. In general, you pay your premiums on a yearly basis, although this frequency depends on your policy and insurance company.
When you set up a Payment Mandate, you are allowing your insurance company to debit your premium payments from your bank. It is a legally binding document, so be sure you read it carefully and understand the terms and conditions underlined in it.
What are the types of Term Life Insurance payment modes?
When you set up auto-payment for your insurance plan, you never have to miss a premium payment again! Usually, these are the main types of premium mandates.
Online payment
Many insurance companies give you the option to pay for your premiums online.
Insurance company’s payment gateway: One of the safest ways to pay for your premiums is through your insurance company’s payment gateway. Most insurance companies provide an option to register for an account and then make a payment with your registered details. Although payment modes vary by insurance companies, many offer internet banking, UPI, debit and credit cards, EMIs, and more.
Internet banking: If your policy supports internet banking, you can pay premiums from your bank's Internet Banking Facility.
Through e-wallets: Digital India provides easy ways to make online payments including your premiums. You may be familiar with UPI payment methods, and can pay for your premiums with them!
Foreign remittance: Even if you move overseas, or do not live in India, you can pay your premiums online, or through foreign exchange or wire transfer from an international bank.
Offline modes of premium payment
Not a fan of online premium payments? You can use offline premium payments to pay your Term Life Insurance.
Payment at Branch: Your insurance company may have offices throughout the country, or affiliate offices. Visit your insurance company’s nearest office to pay for your premiums by cash deposit, check, or with a demand draft. In addition, you can pay with a debit or credit card.
ECS Payment: When you choose an ECS payment mode, your premiums will be debited from your bank account to your insurance company on a fixed date. You can set up an ECS payment mode by submitting the ECS mandate documents to your insurance company and then allowing your bank to authorise your insurance company to make withdrawals on your behalf towards your Term Life Insurance policy. Select this payment option if you know you'll have sufficient balance in your bank account over the course of your policy.
What mandates do I need to follow to buy a Term Insurance Plan?
The following are a few of the mandates you need to follow
Proof of identity
You need a photo identity, which can be your passport, driver's licence, PAN card, or Aadhaar card. This proof of identity will verify your name, age, and other details.
Proof of address
A proof of address can be your utility bill (electricity or water bills) or bank statement. If you're renting, you will need a No Objection Certificate from your landlord. In addition, you could also submit your Aadhaar card as proof of address if you live at the address mentioned.
Health records
Most insurance companies need you to complete a health screening or medical examination when you apply. Be sure to have the results of your medical examination, as well as other relevant health records handy. This will help the insurance company calculate your premiums and coverage.
Income Tax Return
Based on your income tax return, you can manage your premium payouts and amounts.
Outstanding amounts and expenses
Ensure you are transparent about your expenses and outstanding amounts including debts, mortgages, and loans. Your insurance company is your assistant in helping you find out how much coverage your beneficiaries need.
What happens if I don't set up a payment mandate or pay my premiums?
Here are the possibilities of not complying with the payment mandate.
Missing the premium payment date
If you miss your premium payment date, you can quickly pay within the grace period your insurance company specifies. Grace period in term insurance is a certain time frame where you can pay for your premiums without incurring additional fines. Although premium payment grace periods vary, insurance companies may offer around 30 days grace for yearly payments and 15 days for other payment frequencies.
Lapses in your policy
If your premiums aren't paid after the grace period provided, then the company will make your Term Life Insurance "lapse", and will terminate the plan without notifying you. This process is usually outlined in the Payment Mandate, which is why it's so important to go through it. If your policy has lapsed, you can request for your Term Life Insurance to be reinstated. Many insurance companies offer policy reinstatement in a certain time frame.
Frequently Asked Questions
Here’s a list of common questions and answers related to Payment Mandate in Term Life Insurance.
Can a bank withdraw money for premium payment directly?
Your bank can withdraw money directly if you have set up the relevant payment mandate.
When can my policy lapse?
If you don't pay your Term Life Insurance premiums, your policy will lapse and then be terminated.
What happens if I miss my Term Life Insurance premium payment date?
Yes, you can make the payment after missing the premium payment date based on the applicable grace period.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.