You buy a life insurance policy to provide financial security for your family in the event of life-related uncertainties. The financial responsibilities vary at every life stage when financial goals vary. To ensure the financial security of the family at every life stage, you should consistently review your policy and increase the coverage when needed. Read on to understand how to increase coverage of an existing policy without going through an elaborate process for buying a new policy.
Assessing the Additional Requirement- The First Step
Life insurance policies provide a dual benefit. They provide financial security for your family in case of any unforeseen event, also they provide you peace of mind. The financial responsibilities are not the same always. They keep changing as you progress in life and so does the need for extra life coverage.
Factoring your financial commitments periodically to assess the gap between the existing coverage and the coverage required is the first step. The death claim proceeds should be able to take care of every financial obligation like household expenses, existing debts, future financial goals like education and marriage of children, medical emergencies, etc. Once you arrive at the gap you will be able to go for additional coverage to that extent with an additional life insurance premium.
Ways to Increase Coverage to the Existing Insurance Policy
When you buy life insurance policy for the first time, it will be commensurate to your existing financial obligations or savings required. You can increase the coverage for the existing insurance policy in the following ways:
Top-up for Existing Plan
This option is a way to buy more coverage under the same insurance policy. With the changing financial security required for different milestones in your life, a top-up for the existing insurance plan for an extra life insurance premium seems the best. You will not have to go through the hassles of buying a new insurance plan every time you need an additional life cover.
Buy Life Insurance With Increasing Cover
Plans with an automatic increase in cover annually are the best way to develop your financial stature over a period. Since life insurance plans are long-term plans, the annual increase in life cover can make up for increasing financial commitments with changing life stages. The increase will be at the rate of 5% to 10% of the sum assured depending on the term of the policy.
Opt for a Plan With Life-Stage Growth
Under this plan, the life cover is enhanced whenever you go through different milestones. Some of the milestones are marriage, childbirth, etc., when your financial responsibilities increase. It is recommended to buy life insurance early in life when you are still unmarried because the life cover grows by 50% when you get married, 25% on the first childbirth, and another 25% on the second childbirth.
Adding Riders to Your Existing Insurance Cover
This is one way of enhancing coverage without a nominal addition to the existing life insurance premium. Some of the riders that increase the existing coverage are:
- Accident and Accidental Disability Rider: This rider covers a situation when you lose your job and your regular income stops due to total or permanent disability from an accident. This cover is available for temporary disability as well. The life cover will continue even without paying a premium for the period of disability.
- Critical Illness Rider: This rider pertains to life-threatening diseases like renal failure, cancer, cardiovascular diseases, or any other illness predefined as critical by the insurer. A lumpsum payout will be made for the treatment of the disease.
- Income Rider: This rider substitutes the financial income of the policy holder even in their absence. Opt for this rider if you feel that the nominee for your policy will not be able to handle the lump sum received as a claim payout. The nominee will receive a fixed monthly payout till he or she is alive.
Buy a New Plan
If the provisions mentioned above for enhancing the coverage for your existing insurance policy are not available, then you will have to look for other options like buying a new plan to the extent of extra coverage required.
If you buy the new policy from a different insurer, make sure to inform both insurance companies about the second plan to avoid complications during the claim settlement.
Conclusion
Choosing the right insurance plan is crucial if you intend to secure your family financially at every stage of life. Buy life insurance that has the provisions mentioned above for additional coverage to an existing plan.
If your existing plan does not provide for any of the options for enhancement, buying a new plan is the alternative. If going through the strenuous process before the approval of the cover is not what you prefer, do thorough research and buy the right plan that keeps your family financially secure at every stage of life.