What to do to determine the right sum assured for your term life insurance and increase its cover?

Calculating your income, expenses, financial goals and liabilities will help you determine the right sum insured for your life insurance. These parameters are dynamic and change over time. Inflation increases the cost of living.

Hence it is difficult to determine the appropriate sum insured for your term coverage. You may find that what you consider to be enough today is not enough tomorrow. There is no way to know whether your term plan will be enough to meet the needs of your entire family.

You can ensure that your family has adequate coverage with your term plan by increasing the coverage on your term policy.

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Ways to Increase Term Life Insurance Cover

Here we have discussed some ways that can help you in increasing your term insurance coverage.

1. Buy Another Term Policy

If you want to upgrade your term policy coverage, you can purchase another policy that has a higher level of coverage. However, this will require you to do the whole thing again. This includes searching for plans, comparing, shortlisting, and documentation. Also, you will need to go through medical screenings again. Higher coverage may comes at a higher price, and there are possible rejections due to certain health factors or age.

A second factor to consider: Having two separate term policies is cumbersome. Your family will have two claims to file, and then you’ll have to follow-up twice. It will be difficult.

2. Add Riders To Your Term Policy

For an extra level of coverage, you can add riders to existing policies by paying extra premium. The most popular riders are:

  • Accidental Death Benefit – This rider provides additional benefits to the nominee in case the policyholder dies in an accident.
  • Waiver premium – If a predefined event takes place, this rider will waive any remaining premiums and the nominee will receive the coverage without having to pay the premium.
  • Critical illness coverage – This riders provides additional coverage for critical illnesses. The nominee receives the additional amount. You can check the list of critical diseases that insurance company covers.
  • Accidental Disability Rider – The rider provides additional benefits for the nominee if the policyholder becomes disabled because of an accident.

3. Purchase Increasing Term Insurance Policy

The sum assured will increase each year with an increasing term insurance policy. However, the premium does not change throughout the policy’s term. You do not need to add any documents or fulfil terms and condition to increase the sum assured.

There are many options available for increasing term insurance coverage. You can choose the one that best suits your needs. Here are some of the increasing coverage options available to you by insurance companies.

  • An annual increase of 5%, 8%, or 10% until the sum assured doubles.
  • An increase of 5%/ 10% per annum until the end of the policy.
  • An increase of 5% per annum until the age 55

4. Life-Stage Growth Term Insurance

This type of insurance provides growth at different stages in life, such as marriage, birth, and retirement. Life-Stage Growth Term Insurance is only suitable if you purchase a plan early. The best time to buy is before you marry because marriage offers the highest growth. There are three main life stages that offer growth in sum assured. These include marriage (50%), 1st and 2nd children-birth (25% each).

Conclusion

There are many options to increase your term insurance coverage. It is best to choose a term policy with an increasing coverage option. This is because it is more convenient and requires no extra documentation. The claim process is simpler same as a traditional term life plan. Premiums remain the same throughout the policy term. If you’re not married, you might consider life-stage growth insurance.

You can compare the different options, their costs, and their return, depending on your age and your salary. Term insurance is intended to provide financial protection for your family during your absence. The coverage should be sufficient to meet their needs.

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Prateek Mahesh

Prateek has 17+ years of experience writing in Investment Strategy and Sales for Life Insurance. He has done MBA in Insurance and Investment.

Their aim is to educate people on various insurance topics so that they can make wise decisions.

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