In the dynamic landscape of financial planning, term insurance emerges as a foundation for safeguarding the future of your loved ones. Many things must be considered before buying term insurance, depending on your income, expenditure, and financial goals. As a responsible investor, you might wonder how you can increase the cover amount of term insurance. This article aims to shed light on the same and also the benefits that come with boosting the coverage amount of term insurance.
Enhancing your term insurance coverage is like giving your family an extra layer of protection. By understanding your options and choosing wisely, you can ensure that your loved ones are well taken care of, no matter what life throws your way.
What is Term Insurance Cover?
Before diving into the benefits and how to increase the coverage amount of insurance, let’s briefly understand what term insurance coverage is. Term insurance is a type of life insurance that provides financial protection for a specific period, known as the policy term. If the insured person passes away during this period, the chosen beneficiaries receive a payout, known as the death benefit.
Also Read: When is the Right Time to Buy Term Insurance
Steps to Increase Cover Amount of Term Insurance
While investing in term plan insurance, one of the key factors one considers is to leave an amount that can fulfill all their family’s financial needs to the best. Therefore, it is important to calculate everything they might require financial assistance in. For example, medical aid, children’s education, paying off debts or loans, weddings, and general expenses are the top areas for expenditure. In addition to all the expenses, one must remember to include inflation in the overall amount.
Once you get a final figure that could meet your financial goals, you can make a term insurance plan investment with the said amount. However, if you’ve already made an investment and are looking to explore ways to increase the coverage amount of term insurance for your family, this guide will help you.
Here’s a simple breakdown of what you need to know to increase the coverage amount of term insurance:
Step 1: Understand Your Options for More Coverage
Increasing your term insurance coverage is a way to ensure your loved ones are better financially protected if something unexpected happens to you. There are two main ways to do insurance coverage:
Use the Increasing Cover Feature in Your Current Plan
Some term insurance plans offer a helpful feature called the “increasing sum assured” that can be helpful to increase the cover amount of insurance. This means you can raise your coverage amount at certain important points in your life, like when you get married, have a child, or adopt one. This option gives you peace of mind that your family is well taken care of during these crucial times.
The catch is that when you choose to increase the cover amount of term insurance, the amount you pay for your insurance will also increase substantially. But don’t worry, everything else about your plan stays the same – no changes in the rules or benefits.
In the instance of any misfortune, your family will get the higher amount you’re covered for as long as you’ve paid your premiums and your policy is active. This option is handy because you can improve your existing plan without any fuss.
Get a New Plan with More Coverage
If your current insurance plan doesn’t let you increase the cover amount of insurance, there’s another way. You can think about getting a whole new term insurance plan.
Here’s how it works: stop your old policy and start a fresh one with a different insurance company. The new plan considers things like your age, health history, and how much coverage you want. Since you might be older now than when you got your first plan, the new plan could cost a bit more. So, it’s super important to compare different plans to find one that’s not too expensive but gives you what you need.
This choice takes a little more effort, as you will be required to get new medical tests, but it can be great if you’re not happy with your current plan. And remember, it’s better to deal with a little hassle now than to leave your family without enough protection later on.
Step 2: Picking the Right Path for You
So, which option is better? Well, that depends on what you want and what your current plan is like. If you like your current plan and it lets you increase coverage, you can stick with it.
But if your current plan doesn’t work for your needs, it might be a good idea to check out other companies that offer term insurance online. You can shop for a new plan from your home without any trouble.
Step 3: Making a Smart Decision
Before you make a decision, think about what your family would need if something were to happen to you. Take into account things like how much money they’d need for everyday expenses, paying off debts, and planning for the future.
If you’re looking for affordable good coverage, consider exploring the different term insurance plans many companies offer nowadays. They offer different options that could suit your income and age.
Read More: LIC Tech Term Plan Premium Calculator
Benefits of Increasing the Cover Amount of Term Insurance
When you increase the cover amount of insurance. You are taking a proactive step towards the financial security of your future. The benefits of higher coverage range from ensuring enhanced financial security to accounting for inflation and life’s significant milestones. While evaluating your options, consider your family’s needs, budget, and long-term goals.
Here are some of the benefits that you can enjoy when you increase the coverage amount of insurance
1. Enhanced Financial Security
One of the most significant benefits of increasing your term insurance coverage amount is the assurance of improved financial security for your family. A higher coverage amount means that in the event of your untimely demise, your loved ones will receive a more substantial payout. This can help them maintain their quality of life, cover everyday expenses, pay off debts, and plan for the future without financial strain.
2. Coping with Inflation
Inflation is a reality that affects the purchasing power of money over time. By opting for a higher-term insurance cover, you can account for the impact of inflation on your family’s future expenses. This ensures the payout remains relevant and sufficient to meet their needs, even if prices rise in the coming years.
3. Provision for Life Milestones
Life is a journey marked by milestones such as marriage, parenthood, and homeownership. Each of these milestones often brings added financial responsibilities. When you increase the cover amount of insurance during these pivotal moments, that ensures your family is adequately protected during these transitions. They can tackle new financial obligations without worries about financial security.
4. Cost-Efficiency in the Long Run
While it’s true that when your increase the coverage amount of insurance. Your premiums also go up, it is essential to consider the long-term benefits. Paying slightly higher premiums now can save your family from potential financial distress in the future. The cost-effectiveness of higher coverage becomes evident when compared to the potential financial implications of being underinsured.
5. Peace of Mind
Knowing that your family is well-protected, regardless of unforeseen circumstances, brings peace and tranquillity. With an increased cover amount of term insurance, you can rest assured that your loved ones will have the necessary financial resources to face life’s challenges and uncertainties confidently.
Increasing Cover Amounts are there in Term Insurance
Many types of increasing cover amounts of term insurance are available in the market right now. You can go for a cover amount that fits your bill perfectly. In other words, choose a cover amount that fits your financial goals.
There are different types of modes available to increase the cover amount of insurance in the insurance market lately. You can consider the following examples
- 5%/ 8%/ 10% increase on year on year basis until term insurance’s cover amount doubles.
- 5% or 10% yearly increase till the end of the policy period.
- 5% increase every year till the term policy matures to 55 years.
Apart from this, if you want to buy an increasing cover plan to balance the inflation rate, you can choose one with the option with an increasing interest rate close to the inflation percentage.
Choosing a cover plan that meets all your financial goals is a wise decision. But before finding ways to increase the cover amount of term insurance, it is important to know the exact amount that will satiate your family’s financial needs. Inflation is a big thing to note here as well.
But all in all, it is easy and better to increase your cover amount now so that your family’s needs are not compromised at a later stage.