The main aim of a term insurance plan is to provide financial support to your family and loved ones in your absence. You intend to leave behind a sufficient corpus that takes care of their financial needs after your demise. Thus, calculating the right coverage is essential.
The term insurance cover should conveniently include various responsibilities like children’s education, weddings etc., repayment of the loan (if any), and also consider rising inflation. Even if you have opted for lower coverage, there are ways to increase your term insurance policy coverage.
Read on to know more.
Ways to Increase Your Term Insurance Cover
Option 1: Purchase a new term insurance policy altogether
One way to increase your term insurance policy coverage is to buy a new one. However, opting for this option is not always recommended unless you have a different type of life insurance policy with lower coverage.
Buying a new term plan would be going through all the hassles and the buying procedure all over again. Re-submitting the documents, undergoing medical tests, etc., can be tedious. Also, since you might have aged from the last time you purchased the policy, the term plan premium may be higher.
Option 2: Opt for the increasing-cover option
The increasing cover option under a term insurance policy is a better alternative than going through the complexities of buying a new policy. Under the increasing cover option, your cover amount automatically increases with time until it reaches the maximum level.
As a result, you need not undergo any new additional medical tests, and your term life insurance policy systematically upgrades the coverage without you having to intervene.
You can increase the cover by either using the percentage increase mode, the maximum cover aimed for mode, or a specified end-age mode. However, the term plan premium for increasing cover options is typically higher than the regular term insurance policy.
Option 3: Opt for a life-stage growth option
Added responsibilities at different milestones should increase your term insurance coverage. These milestones or life stages may include an event like marriage, childbirth etc.
The option of life-stage growth allows you to increase your life cover at a pre-determined percentage at these different milestones. You can get in touch with your insurance company, provide the necessary proof and documents regarding the milestone and get an increased life cover.
Tata AIA term insurance plans offer life-stage growth options under its term plans, such as Tata AIA Sampoorna Raksha Supreme. The rate of increase of the sum assured is pre-determined for each milestone.
Option 4: Add term insurance riders
Riders to the base term plan can help you customise your policy and enhance the cover. However, they provide additional coverage; thus, they come at an extra cost.
Some of the common term insurance riders include:
- Critical illness rider: This rider provides additional coverage if the life assured is diagnosed with a critical illness that the insurance provider predefines. The claim payout for critical illness riders is usually a lump sum.
- Accidental disability benefit or death benefit rider: The medical expenses related to accidents are huge. If one opts for an accidental disability rider, this rider covers the medical expenses arising from the accident. Also, in case of the policyholder’s death, the nominee receives an additional amount over and above the sum assured.
- Income rider: You can opt for an income rider if the benefit should be given to the nominee as a systemic payment, not a lump sum amount. With an income rider, the nominee receives a fixed monthly income for specific years as mentioned in the policy or upon the nominee’s death.
- Waiver of premium rider: This rider can come into force in case of the policyholder’s demise or accident-causing permanent disability. The remaining term insurance policy premiums are waived, and the policy continues as per schedule. The policy document mentions the situations wherein this rider becomes operational and the premiums are waived.
Conclusion
Term insurance coverage is an essential part of financial planning. It is basically meant to protect your family financially in the unfortunate event of your death. However, the benefits of term insurance are not just restricted to protection but also include tax savings, building a habit of regular savings, post-retirement income (in some cases), etc.
Therefore, ensure you have adequate term insurance coverage, so your loved ones can maintain their standard of living, even in your absence.
