The purpose of buying term insurance is to financially protect your loved ones from the various risks of life. This financial support benefits them in the event of your untimely demise. It helps them to stay financially afloat and allows them to manage daily expenses. The financial support that the family of the policyholder receive is known as life cover.
Based on the requirements and budget, you may choose a term insurance policy of your liking. However, there could be circumstances at a different life stage that might require you to get a higher amount of life cover. How do you increase the life cover of your term insurance? Read on to know more.
A term insurance policy is a type of life insurance policy. In this policy, the family of the policyholder is financially compensated in the event of an untimely demise of the policyholder. The insurer compensates the family with the sum assured offered under the selected plan. This amount can be used to take care of day-to-day expenses and pay off any debts and loans.
If you opt for a basic term plan, chances are that you might not be able to increase the life cover amount offered under the plan. However, there are two ways that you can consider if you want to increase your term cover amount. They are:
- Opting to buy a new plan
If you feel that your current term plan is offering you a lower life cover amount than expected; you have the option of going for a new term plan. A new term plan might offer you better life cover that could suit your requirements. However, if you opt to purchase a new plan, you will have to start the process from scratch, which means going through the documentation and medical tests again. If you opt to buy a new plan at an age where your body has undergone significant changes, chances are the insurer might charge you more for the plan. Your application could also get rejected due to the age factor. Also, having two different plans could be costly to manage and could be a documentation nightmare for your loved ones if you were to pass away.
- Opting for an increasing term plan
The better alternative when it comes to increasing your term cover amount is to opt for an increasing term plan. In this plan, the life cover amount increases annually without any change in the premium that you pay for it. Do keep in mind that the premium is a bit higher as compared to a basic plan due to the benefit provided by this plan.
What are the benefits of an increasing term plan?
The following are the benefits of an increasing term plan:
- Increase in the cover
As the name suggests, when you upgrade your existing plan for an increasing term plan, the life cover amount increase annually. This does not impact the value of the premium. The premium remains the same. However, due the nature of the plan and the benefit that is provides, the premium payment is a bit higher, when compared to a basic term plan. This might make your think twice before getting this plan.
- Adjusts to the cost of living
As the cost of living keeps increasing due to various factors, your family could also get affected by it in your absence. However, with the increasing life cover in this term plan, your family could easily manage to cover all the necessary expenses. The amount can be used to pay off any debts or loans that could otherwise cause financial burden. This life cover could also be used to secure the future of your child’s education and marriage.
These are the ways you can increase the life cover amount. If you can manage to purchase an entirely new policy with a higher life cover amount, you could very well opt for it. But upgrading your policy to an increasing cover term plan is a highly recommended option.