Why should you review your term insurance cover periodically?
A person purchases term insurance to enhance the financial security of his loved ones in case of his sudden demise. But insurance requirements are dynamic, and thus, you should review your term insurance cover every two years so that all your needs are addressed carefully. A term plan that you purchased 5-10 years ago won’t embrace you with the right number of benefits for your existing needs. That’s why experts recommend that you should review your term life insurance to evaluate whether the policy offers you adequate coverage for your present situation or not. Most financial consultants recommend reviewing your term life policy annually so that your loved ones won’t face any problems in case of any untoward situations.
You should change your term insurance cover as per your life
Once you grow in life, your needs will change drastically. With every significant change in your life (marriage, buying a house with a loan, child’s birth, etc.), you need to change your term life insurance to some extent. These changes are evident, and thus, it is advisable to reconsider your term insurance coverage regularly. If you reviewed your policy many years ago, then reassess it today without any second thought. Here are some imperative reasons that will inspire you to review your policy.
4 Reasons Why should you review your term insurance cover
1. When Your Family Grows
You must review your term policy if you are planning to get married or start a family. Whether you are planning for your first or second child, any new addition to the family is one of the biggest changes in your life. Thus, you must review your term insurance and purchase enough coverage so that if you die tomorrow, your children can complete their college years through the death benefit. But many people often ignore this and continue to live with their present term policy without reviewing it.
The average cost of raising a child from this/her birth until he/she turns 21 years old comes near about Rs. 20-25 lakh. So, once a new member is added to your family, you should enhance your term life insurance coverage amount. If you think your existing sum assured is inadequate to meet your family’s needs, you can increase the sum assured amount by paying extra premiums.
2. You Have a New Mortgage
Buying a home is one of the biggest dreams of a person, but at the same time, it brings a lot of financial responsibilities and challenges to a person’s life. The experts recommend that you must buy a term life insurance policy for at least the same or more amount as your mortgage. Suppose you die during the tenure of the policy, then your family members can use the money (that they receive from the insurance company) to pay off the mortgage.
If you purchased a term life insurance policy with a death benefit of Rs 1 crore and you purchased a new home with a mortgage of Rs 3 crore, then you certainly need to upgrade your term insurance policy. Why do you need to update your policy? Because taking a mortgage is a huge responsibility. After your demise, it would be your spouse or other family members’ responsibility to pay off the home loan amount. So, you must update your sum assured so that it can match up your mortgage. In this way, you can ensure that your family will be debt-free after your sudden demise.
3. When Your Career Changes
People often change their jobs for better opportunities and exposure. And this is certainly accompanied by changes in the financial status of a person. You should make new financial decisions if you get a promotion, hike in salary, or migrate to another organization. Whenever you change your job or meet a hike in your salary, you should review your term policy. Thus, your family members can maintain and lead their current lifestyle without compromising anything.
4. Changes in Beneficiaries
You may need to change beneficiaries according to circumstances. For example, you must include your spouse as a beneficiary in your term policy. On the other hand, after a divorce, you might need to withdraw your former spouse’s name. So, you must review your beneficiaries periodically to ensure that you have included the right people under your policy. You may experience some devastating effects if you fail to do this. In other words, your death benefit may go in the wrong hands and will not be utilized by your family members who need the amount desperately.
If you purchased term life insurance policies 5-6 years before, then your term plan may not offer adequate coverage for your existing needs. Over the past few years, the insurance companies have provided several new-age insurance products that are thronged with customer-friendly features and benefits. While reviewing, check all imperative features and benefits so that your term policy comes with all benefits and coverage. Then, if required, you can change or port to another plan that caters to all your current needs and requirements.
