Can the sum insurance of a term plan be increased during policy tenure?

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When you purchase a term life insurance policy, you intend to leave a significant amount of cash for your household in the event that you die before fulfilling all of your monetary commitments. To determine the appropriate amount assured, determine how much you’d require completing all of your obligations which include your kid’s education, family weddings, settling all of your debts, and assisting your family’s current standard of living in the lengthy period.

In contrast to these considerations, there is the issue of inflation. The initial sum promised that you diligently calculated may not be sufficient for your family’s financial requirements. However, there is no need to worry. There are options to increase your term life insurance’s sum assured on maturity during the policy tenure.

What is Term Life Insurance?

A term insurance plan is the most basic and straightforward type of life insurance. The policyholder pays a premium amount for a set period – often around 10 to 30 years and if he/she dies within that time frame, their family receives a lump sum payout.

Term life insurance policies offer no payment when the term ends, and no payout other than the lump sum death payout. To make things easy, most term insurance plans are “level premium” which means your monthly premium value remains the same throughout the plan’s duration.

How to increase the sum assured in life insurance?

Purchasing a new plan is one option to enhance your term life insurance insured amount. You would have to complete the entire documentation procedure all over again, as well as provide fresh medical examinations. Considering the fact that you will be older and maybe have a fresh health problem, there’s a potential that your policy will be too pricey. In the worst-case scenario, the upgraded policy you are looking for may be refused to owe to age or medical concerns.

On top of the problems you would encounter in handling two distinct plans, the members of your family will also face challenges in completing the claims procedure twice. They will be required to file two pieces of documents and then, follow up with each insurance company individually – all while suffering for your unfortunate loss.

If you choose to cancel the prior plan, you will remain uninsured in the gap between the two plans. That is usually a terrible idea.

How to increase the sum assured in term insurance during policy tenure?

There are 2 primary methods for boosting term insurance sum during the policy’s duration.

Method 1: Upgrading your existing Term Insurance Policy

If you are looking to upgrade your insurance policy amount, the first option to consider is to upgrade your existing term plan. So, at the time of renewal, you can file for an enhancement of your existing coverage. Your insurance provider might need you to submit more paperwork, file new applications, and go through additional medical examinations, among other things.

Once your coverage is approved, your insurance company will notify you about the increase in your premiums based on the medical examination findings. This is the simplest process, but some plans might not even provide an option to enhance coverage. In that case, you would be required to do any of the following:

  1. Opt for an additional term insurance plan from the same insurer
  2. Opt for a different term insurance plan from a different insurer

However, in both cases, you need to remember to disclose the details of your erstwhile policy so that the insurer is able to underwrite your policy properly and there are no hassles at the time of a claim if the need arises.

Method 2: Buying an Increasing Term Life Insurance Policy

Rather than dealing with the complications of many policies, you may get term life insurance with a growing benefit option. As the name implies, your coverage amount will steadily increase over time – until the total insured amount reaches its maximum limit provided by the insurance provider.

You will not be required to undertake any new healthcare exams, nor will your application for a policy upgrade be denied. The plan will be incrementally upgraded without your manual assistance.

There are several expanding protection alternatives accessible in the market, depending on the company. You may select the appropriate insurance for you depending on the percentage growth, the maximum coverage you want, or an ending age.

Conclusion

Term insurance is cheap and provides financial protection for the policyholder. This is unmatched by any other form of insured products. Increasing term life insurance plans, allow you to provide your family members better financial security in future. It also enables your loved ones to enjoy their life without financial constraints. The entire term insurance plan depends upon the choice of the policyholder on how he/she wants to counter the rate of inflation and upgrade their life insurance plan. In case you are thinking that your family needs a little more coverage, then it’s time to speak with your insurance provider or opt for another plan today!

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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