How Can I Increase Term Insurance Coverage?

India’s insurance penetration is a mere 3%. Moreover, when it comes to life insurance, most people are unaware of ‘underinsurance’ — having a term insurance coverage amount less than what is required. 

To put it into perspective, almost 988 million Indians are uninsured, and those insured have coverage amounts of less than 8% of the sum required to be financially secure. To ensure optimal coverage, adjusting your term insurance coverage amount is important. 

When Should You Increase Your Insurance Cover Amount?

Your financial requirements will evolve as you grow older. Some of these instances can be a good trigger for you to increase your term plan coverage: 

1. Family responsibilities: You will most likely be unmarried and have limited family responsibilities in your mid-20s. However, things will change as you get married and start a family. You will have a partner or children to look after. Added family responsibilities make it important for you to re-evaluate your insurance coverage. 

2. Change in financial liabilities: With age and growing earnings come more assets you own and loans you may have taken for them. Such growing liabilities with your age, especially during 30-50 years of age, is a common scenario. Hence, you might need to increase your term insurance coverage to ensure your family is financially secured to deal with such liabilities in your absence. 

3. Increased income or expenses: An increase in your income or expenses is a clear indicator to reassess your insurance needs. Make sure that the coverage amount reflects your changed standard of living.

4. High inflation rates: Inflation reduces the value of money over time and diminishes the actual worth of your insurance cover. If inflation rates rise, you better increase your cover amount to match the change.

How To Increase The Term Life Cover Amount ?

Many life insurance policyholders are confused about the process for increasing their term life coverage amount. Here are three simple methods you can use: 

1. Purchase a new term plan 

The easiest way to increase your coverage amount is to purchase a new term insurance. You can choose the same company or opt for a different insurance provider. 

2. Buy insurance with an Increasing-cover option

Buying a term insurance policy with an increasing cover option can be a better deal. Unlike a standard term plan, an increasing cover option ensures that your coverage amount grows bit by bit as the policy matures. This method is mainly preferred since you do not have to go through a new application process again and have no chance of getting your upgrade declined.  

3. Choose a plan with a Life-stage increment

Lastly, you can choose a term insurance plan with a life-stage increment. Unlike other term plans, in this life insurance policy, you can increase your cover with every significant life event, like marriage or parenthood. However, the premiums to be paid also increase with every increase in the cover amount. This method also does not require any fresh applications or medical tests.

Why Choose An Increasing Cover Option ?

By opting for an increasing cover option, you can enjoy the following benefits: 

1. No additional premium: A typical increasing cover option does not require an additional premium. So, you will still have one policy and one premium till the end of the term plan. 

2. Tax benefits: Like any other term insurance, a life insurance policy with an increasing cover option has tax benefits. The premium costs paid over a year can be used to avail up to ₹1.5 lakhs in tax deductions.

3. No underwriting process: Underwriting is the risk assessment for your insurance plan. It includes a thorough study of your income capacity, health condition, underlying diseases, and so on. Fortunately, you do not have to go through this ordeal again with the increasing cover option. 

4. No risk of rejection: Unlike starting a new term life insurance, the increasing cover option ensures that you have no risk of rejection. 

Key Takeaways

Financial requirements are not static; they are bound to evolve along with your personal growth. Therefore, it is essential to revise your insurance coverage requirements after every significant development in your personal life and family situation. With every informed decision, you are getting one step closer to solving India’s massive underinsurance problem. 

So explore your options thoroughly on platforms such as PhonePe and make the right choice for you and your growing family!