Life is unpredictable, but investing in a life insurance policy is a way of keeping your loved ones protected. Also, since change is the only thing constant in life, it is necessary to re-evaluate your life insurance policy with changing situations to ensure it fulfills its purpose well.
Life insurance policy is a must-have in every financial portfolio. However, contradictory to common belief, a life insurance policy is not merely an investment that you never need to re-visit. It is essential that with changing circumstances in your personal life, your life insurance policy too is re-evaluated.
Why? To simply allow the life insurance policy efficiently fulfill its purposes, which are protecting the family financially after the policy holder’s death or the policyholder being able to enjoy the accumulated corpus after its maturity. Certain circumstantial changes may require you to increase the life cover or alter the life insurance plan, etc. to ensure you and your families are adequately benefited.
Unfortunately, very few insurance providers offer policies with option of re-evaluation. If your life insurance policy or term life insurance allows you to increase the sum assured, there should be no reason for you not to re-look into same. Such policies allow to increase the cover at a life event like marriage and child birth. However, they come with a cap, i.e. you would be allowed to increase your sum assured only to a certain limit.
If your policy does not allow you to upgrade the coverage, or increase the sum assured as per your requirement; it would always be wise to consider adding a new policy to ensure right and adequate cover for your loved ones. In such a case you may continue to hold two policies – the existing policy and new policy. Doing this shall ensure your loved ones remain protected, if any unforeseen event occurs.
When should you re-evaluate your life insurance policy?
Certain situational changes in life should persuade you to re-evaluate your term life insurance.
- Change in number of dependents
Buying a life insurance policy when single and with parents will obviously not be sufficient when married and with kids. Therefore, it is essential to re-visit your life insurance policy to increase the sum assured. The life assured should then take life cover after considering child’s education, marriage expenses, spouse’s and/or parents’ health, etc.
After this re-evaluation, you can upgrade the existing life insurance policy by paying additional premiums or buy a new policy altogether.
- Change of beneficiary
It is necessary to review beneficiaries of your life insurance policy, especially after marriage, divorce, remarriage or death of spouse/beneficiary. Be aware that a minor without an Appointee cannot be named as beneficiary. Process for change in beneficiary is very simple.
If you have just purchased a new house, thanks to the home loan or have taken any other kind of loan for any reason, then here’s another hint for you to re-evaluate your life insurance policy. When a family is under the burden of a loan and an unfortunate event occurs, the financial stress can be tremendous.
Therefore, when you take a loan, you should also safeguard your family’s financial future by upgrading the sum assured or buy a new policy to cover liabilities so that debts can be taken care of after the death of the policyholder.
- Increase in Income
In case of a promotion or increase in income, the rise in salary would directly mean an upgrade in your lifestyle. And to ensure that same lifestyle can be maintained even in future, an upgrade in your life insurance policy is necessary.
- Re-evaluation for a better deal
This is purely to get more out of your investment in a life insurance policy. Re-evaluation is necessary as there are several companies offering policies that may fit your requirements. Therefore, doing some research here can give you the best deal for your money.
Even though you already hold a life insurance policy, understand what your policy offers and then look around to gauge the kind of policies available. With this, you may want to negotiate with your insurer accordingly. Your insurance agent too might be able to help.
Investments made towards a life insurance are mostly seen as a financial assurance in tough times. Therefore, it is extremely necessary that it stays appropriate over time, with whatever changes that may take place. And a regular re-evaluation of your life insurance policy can take care of this. One should at least look at his term life insurance cover at least once in a five year, if not earlier.