The Importance of Regularly Reviewing and Updating Your Term Insurance Policy
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Most of us consider purchasing term insurance as a one-time investment. Once we buy a plan, we pay the premiums and rest assured of financial protection during times of need. We forget that as we grow through life, our financial needs evolve. The plan we selected when we were 20 or 30 may not offer adequate coverage to help our loved ones with new financial goals. Many people evaluate their finances and purchase a Rs. 1 crore term insurance plan in their late 20s and early 30s. However, as needs evolve, they may need a term plan that offers coverage of Rs. 2 crore or more. Let’s better understand how and why you should review your term plan regularly.
Term Insurance - Your Lifesaver in Times of Need
Insurance is a financial tool that provides a sense of security and peace of mind. It serves as a safety net to protect you and your family from unforeseen financial hardships. The primary objective of a term plan is to provide a substantial lump sum to your beneficiaries if something happens to you during the policy term. The amount can help your family cover daily expenses, outstanding debts, future financial goals, and more.
Now, let’s explore why you need to review and update your term insurance policy intermittently.
Reasons to Review Your Term Plan Regularly
Changing Life CircumstancesYour financial situation will evolve. When you’re young, you may have very few dependents or financial responsibilities. For example, a young man in his early 20s may have to worry about a vehicle loan and helping his parents once they retire. However, an individual in their early 30s may have to worry about taking care of their spouse or paying for their child’s education while also looking after hospital bills for elderly parents. Reviewing your policy allows you to evaluate your finances and account for changing circumstances.
Beneficiary ChangesThe beneficiary is the person who will receive the sum assured payout from your term policy. Your choice of beneficiary may change over time. Initially, you may select your mother or father. After a few years, you may want your spouse to be the beneficiary. When your family grows, you will likely want your children to be the beneficiaries. Reviewing your policy encourages you to take stock of your life and update your beneficiary accordingly.
Income IncreaseYour income changes drastically over time. Frequent increases in your income will likely lead to an increase in your standard of living. An outdated sum assured may not be enough to help your loved ones maintain their new standard of living if anything happens to you. Consider evaluating your term insurance coverage whenever you get an increment. Adjust the policy coverage to meet your family’s evolving needs.
Inflation ConsiderationsInflation depreciates the value of your money. Although Rs. 1 crore may seem like a large sum now, it may not be sufficient for your loved ones in 20 or 30 years. When the inflation rate increases, you should consider reviewing your policy to evaluate how much your loved ones will need in the future.
New DebtsAlmost every young professional dreams of owning their own home. A safe abode to relax and enjoy with their loved ones. However, most people need a loan to help them achieve this goal. While you can comfortably manage loan repayments now, your loved ones might struggle without you. Ensure you review your term policy coverage whenever you take on new debt, such as a home loan. Get adequate coverage to protect your loved ones financially and help them repay debts during a difficult time.
Regularly reviewing and updating your term plan ensures your loved ones have the financial protection they need to face life’s uncertainties. When you update your policy, you can rest assured that your family will remain financially protected. Schedule time every three to six months to evaluate your term plan and secure a brighter future for your loved ones.
- Top 5 Reasons Why Term Insurance is Essential for Financial Security
- The Impact of Inflation on Your Term Insurance Coverage Amount
- Benefits of Term Insurance Plans You Must Know
- How to Choose the Right Term Policy Period?
- What Is Renewable Term Insurance and What Are Its Benefits?
- How to Switch Your ULIP Fund Portfolio to Maximize Your Returns?
ARN - ED/11/23/6117
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