Term Insurance

Can you increase Term Insurance coverage midway?

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By Upstox Desk

5 min read | Updated on January 10, 2025, 08:00 IST

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SUMMARY

Karan bought a term insurance policy at 26 with a sum assured of ₹50,00,000. Now, five years later, he is married, has a 1-year-old son, and a house loan of ₹37,50,000 with a ₹35,000 monthly EMI. His wife is a homemaker, and Karan realizes his coverage is inadequate for his family’s needs. He is unsure whether he can increase his current policy’s coverage or if he needs to purchase a new term insurance policy to ensure sufficient financial protection.

Having term insurance protects your family from any unforeseen events in the future. In the event of the policyholder's unfortunate death, a term insurance policy ensures that the family can maintain its lifestyle and stay afloat for a reasonable time. However, if the term insurance sum assured is inadequate, the entire purpose of having a life cover is defeated.

Further, your life circumstances keep on changing. Major events like marriage, the birth of a child, or a significant change in financial status can significantly alter one’s coverage needs. Hence, many people wish to change their insurance coverage midway. This blog will help you decide whether and what process to follow.

Understanding term insurance coverage

When you pay a premium to the insurance company, you are offered a ‘sum assured’ or ‘death benefit.’ This is the amount that your family/dependents would receive in case you are unable to make it through the policy term.

Term insurance is characterised by its fixed nature. Once a term insurance policy is signed, its coverage amount and premiums typically remain unchanged throughout its duration. This simplicity and predictability make it one of the most preferred insurance modes for people of all ages.

Reasons for increasing insurance coverage

Even though the financial and insurance planning depends on the unique needs of an individual, here are some of the common reasons why you often want to increase insurance coverage:

  1. If you have recently married or plan to marry soon, you start thinking more about financial duties and dependencies.

  2. If you recently had a childbirth or are expecting a child, you might think about additional responsibilities (such as a child’s education and healthcare). This is why you might want extra coverage.

  3. If you have recently purchased a house (which often comes with a mortgage), consider adjustments in your insurance to cover potential outstanding debts and protect your family's living situation.

  4. If you have made career advancements that resulted in lifestyle changes, you might want to increase your coverage amount.

  5. If the overall debts (loans and obligations) have increased recently, it is time to enhance your term insurance coverage.

Options for increasing coverage

Even though the terms and conditions of a term insurance plan are fixed, here are a few options that you can opt for increasing coverage:

OptionFeasibilityLimitation
Opt for a new plan and upgradePurchasing a new term life insurance plan is a straightforward method to increase coverage.This may involve higher costs due to age and health conditions and the risk of application rejection.
Increasing cover optionBuy a term plan that automatically increases the cover annually until a specified limit, without new medical exams.Coverage increase is capped; it may not suit all financial projections.
Opting for life stage increment planSuch a plan allows an increase in coverage based on life events like marriage or childbirth without additional costs.Limited to specific life events; increases are percentage-based and may be insufficient.

You can also look for add-on riders on the existing policy. It is advisable to connect with customer support or with your insurance agent if you have specific queries related to increased coverage.

Step-by-step process of review and adjusting term insurance

Here is a stepwise guide to reviewing and adjusting the existing term insurance policy:

  1. Evaluate your existing policy to understand coverage limits and any potential for increases.

  2. Identify if there is an actual need for increasing coverage by evaluating recent life changes.

  3. Contact your insurance provider or agent enquiring about the increased coverage.

  4. Submit the documents as required by the insurance company and complete other formalities like medical examination.

  5. Get approval and receive an updated insurance policy.

Things to consider

Before deciding to increase the coverage amount, here are a few points to ponder:

  1. You should know that additional coverage shall come with a cost, which can be significantly higher than the existing plan.

  2. Different factors, such as current age, health status, and the increased amount of coverage, shall be considered to recalculate the premium.

  3. Carry out a cost-benefit analysis by comparing the potential benefits of increased coverage to justify the extra cost.

  4. Review if there are any significant changes in the policy terms and conditions post the increased coverage.

  5. Ensure that the higher premiums remain affordable over the term of the policy, especially as personal financial circumstances can change.

Summing up

With different life milestones, your responsibilities and duties keep changing. If you had taken a term insurance policy some years back, your circumstances were completely different from what they are today. Hence, if you feel that it is worth paying the additional premium for higher coverage, you must consult your insurer to find ways to increase the existing coverage.

FAQs

Can I increase my term insurance coverage after major life changes?

Yes, you can increase coverage after events like marriage or childbirth through new plans or riders.

What options are available to increase term insurance coverage?

Options include purchasing a new plan, opting for automatic coverage increment plans, or adding specific riders.

Do I need a medical examination to increase my term insurance coverage?

This depends on the insurer and the type of adjustment; some increases may require a new medical exam.

How does increasing my term insurance affect my premiums?

Increasing coverage typically leads to higher premiums, reflecting greater risk and increased benefits.

About The Author

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Upstox Desk is a team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.

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