Review Your Term Plan Coverage After Major Life Milestones: Here is Why

A term plan is the most effective way to cover oneself against the risks of an untimely demise. Through a term plan, I can get adequate coverage at reasonable premiums. While one should take a term plan if one has dependents, one would normally start with a small coverage. A good rule of thumb is to have a life cover of 10-15 times your annual income, but this should be adjusted based on your specific circumstances.

However, as one progresses in age, there is the need to increase the life cover. “Key life milestones such as getting married, having children, purchasing a home, or a significant increase in income should prompt an increase in term plan coverage. These events often result in greater financial responsibilities, making it essential to reassess and upgrade your life cover,” says Rhishabh Garg, head of term insurance, Policybazaar.

Also, as inflation rises, it's crucial to reassess your term plan coverage to ensure it remains adequate for your evolving financial needs. Increasing coverage can help protect your family against the rising cost of living, outstanding debts, and future expenses. Regular reviews ensure your policy stays aligned with inflation.

While there is no one-size-fits-all approach, it’s advisable to review your term plan coverage every three to five years or whenever a major life event occurs to ensure it aligns with your evolving financial goals.

“When deciding on additional coverage, it’s important to evaluate your current financial liabilities, future family needs, inflation impact, and your dependents' long-term financial security,” says Garg.

Consider factors like your outstanding loans, your children's education expenses, and the standard of living you want to secure for your family.

Add Riders

Yes, some add-ons can enhance the effectiveness of a term plan. Some popular options that you can consider when reviewing your term plan are:

Accidental Death Benefit Rider: Provides an additional sum assured in case of accidental death.

Critical Illness Rider: Offers a lump sum payout on diagnosis of a listed critical illness. Health insurance helps you cover your medical bills whereas this rider allows you to recover financially from loss of income during such times.

Waiver of Premium Rider: Waives future premiums in case of disability, ensuring policy continuity.

Brace For Higher Premiums

Increasing coverage will naturally lead to a rise in the premium, as the insurer is covering a larger risk. “However, there are flexible payment modes such as monthly, quarterly, or annual installments, which can help policyholders budget their payments without financial strain,” says Garg.