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Life can often be very unpredictable. You might have high hopes and dreams for your family, especially children but and those plans should derail even if you have to, unfortunately, leave them behind. A term insurance policy can help you here.
A term insurance is a type of life insurance policy. It often has a higher insured sum than traditional insurance policies with a lesser premium fee.
When you buy a term insurance policy there are three important aspects that you should choose wisely.
- Your sum insured.
- Tenure of your policy.
- The beneficiary of your policy.
Of these, the sum insured is arguably the most important. Sum insured is the amount of coverage of the life insurance. It’s the amount your beneficiary gets if they ever have to claim. This is the amount that will come to the financial protection of your family in an unfortunate situation. Hence, choosing the right amount is of paramount importance.
But sometimes, even if you have chosen the right amount of sum insured at the time of purchasing, you would need to change the amount in time due to certain reasons such as
- Your income significantly increased.
- Your family’s needs increased.
- You got married or you got a partner.
- You had children.
- Your quality of life increased.
- Inflation decreased the purchasing power of your sum insured.
In these situations, is there a way to increase the cover amount of your term insurance policy? Let’s see.
How to increase term insurance policy’s cover amount?
There are two ways to have a higher insured sum for your term insurance.
- Increase coverage of your current policy – Some insurance providers allow increasing the cover amount of the current term insurance policy you own. For this, you will have to contact your insurance provider and follow their process.
Most insurers allow these changes when there is a major life event in your life such as marriage, childbirth, major job change etc. This is because insurance companies understand the needs of your family are dynamic and it might change as you go on in your life. Terms and conditions of these could be different for different insurers but as your insured sum increases your term insurance premium amount will also increase. In most cases, the rest of the terms of the policy, including the tenure will remain the same.
- Buy a new term insurance policy – If your insurance policy provider doesn’t allow a top-up for your term insurance, you could consider buying a new term insurance policy with a coverage amount that is adequate. As tedious as it may sound, this is important in making sure your family has enough financial protection. Below are a few pointers that will help you with choosing a coverage amount for your new term insurance policy.
- Choose an amount that will meet the needs of your family members. Take in the possible major life events as well and come to a decision.
- Take into account your family’s financial status as well. If your family have good savings, you could have some liberty in choosing a lesser amount. But in case if your family doesn’t have that kind of wealth, consider that while choosing an amount.
- Your marital status also has an important role. If you are married, you will have more dependents and your coverage amount should ideally reflect that as well.
- Your debts and liabilities should be well covered in your coverage amount. Your family should be able to comfortably pay off debts and even after that, they should have enough money to take care of themselves.
- You should also take into account inflation. Your sum insured could have much less purchasing power some years later. Your cover amount ideally should reflect that as well.
- Use tools like a term insurance calculator to figure out a premium and sum insured that will work for you.
Increasing your term insurance cover amount using one of the above two methods will make sure your family has adequate protection. If you are planning to increase your term insurance cover amount, the best time to do it is now!
