Life can throw unexpected incidents your way when you least expect it. Some may be welcome changes, while others may not. For the unexpected unfortunate incidents, what you need is a financial safety net that can help you and your family to tide over the tough times. The most affordable way to put such a safety net in place is to purchase term life insurance.
Term insurance in India offers you a life cover that goes to secure your family’s financial future. In case something untoward happens to you, your loved ones can rely on the benefits of the term policy to continue to pursue their life goals. Before you decide on a term life insurance plan, you will need to ensure that the cover it offers is adequate. However, it does not stop there. Periodically, and at specific junctures in life, you will need to review the coverage offered by your term policy, so you can make sure it is still sufficient for your needs and your family’s goals.
To understand the importance of this, let us first look at how term insurance in India works.
How does term insurance work?
A term policy provides you with a life cover with a specific period or "term". This is the tenure over which the coverage is valid. To purchase and enjoy the life cover over the said term, it is necessary for you to pay the insurer periodic payments known as premiums.
In the case of your unfortunate demise during the tenure of the policy, the insurer pays out the death benefits or the sum assured to your beneficiary/nominee. For instance, let us suppose that a policyholder buys term insurance in India offering a cover of Rs. 1 crore, for a policy term of 20 years. If the policyholder dies within those 20 years, the insurance company will pay out the sum of Rs. 1 crore to the beneficiary or nominee of the policyholder.
Now, the coverage that you opt for - it may be sufficient in some cases. However, in others, as your requirements undergo various changes during the course of life, the coverage you initially opt for may become inadequate. It becomes necessary, during such times, to review the cover that you have in place.
Why is it important to review your term insurance cover from time to time?
There are many major changes that could occur in life. Most of these will come bearing potential additional costs. As you grow on the path of your career, or as you add new members to your family, your financial requirements also continue to increase. Correspondingly, the coverage that you need to receive from your term policy also goes up.
When you enter a new phase in life, the cover you purchased earlier may no longer be adequate. In such cases, you run the risk of being underinsured. Moreover, the consequences of being underinsured can be costly. This is why it is important to revisit the coverage that your term life insurance plan offers from time to time and verify if it is adequate for all the needs that you and your family may have at that point in life. Without such a periodical review, you may not even realize that you were underinsured until a crisis comes knocking.
To make this easier for you, let us look at some common life events when you will need to review the coverage offered by your term policy.