Can You Increase Your Term Insurance Cover?

Yes, term insurance cover for your insurance policy can be increased while the policy is still active. You choose the best for your family in all situations, and when it comes to life insurance policies, you become even more cautious. One popular and commonly opted for plan is a term cover - a pure protection policy designed to provide financial assistance to your family in case of your unfortunate and unexpected demise.

Key takeaways

• Term insurance cover can be increased during the policy term to adapt to changing financial circumstances.
• This flexibility allows policyholders to adjust coverage levels according to evolving needs.
• Increasing term insurance cover offers enhanced protection for beneficiaries.
• Policyholders can ensure their loved ones receive sufficient financial support.
• It provides peace of mind knowing that coverage aligns with current and future obligations.

What is Term Insurance?

Term insurance is a form of life insurance that provides coverage for a specified period. Unlike permanent life insurance policies, such as whole life or universal life insurance, term insurance does not accumulate cash value over time. Instead, it offers pure death benefit protection, paying out a predetermined sum of money to the beneficiaries if the insured individual passes away during the term of the policy.

Advantages of Increasing Term Insurance Plans in India

Increasing term insurance plans offer a host of advantages for individuals seeking comprehensive and flexible life insurance coverage in India. From affordability to tax savings, these plans provide financial security and peace of mind for policyholders and their loved ones. Explore the key advantages of increasing term insurance plans, including affordability, protection against inflation, tax benefits, and the ability to meet additional financial requirements.

Affordability

One of the primary advantages of increasing term insurance plans is their affordability. These plans typically offer lower initial premiums compared to permanent life insurance policies, making them accessible to individuals with varying budgets. As premiums increase gradually over time, policyholders can enjoy cost-effective coverage that fits within their financial means.

Helps in Overcoming Inflation

Increasing term insurance plans help policyholders overcome the impact of inflation by providing coverage that adjusts to their changing financial needs. As the insured’s financial obligations grow over time, such as mortgage payments, education expenses, or income replacement needs, increasing term insurance ensures that coverage keeps pace with inflation, providing adequate financial protection for beneficiaries.

Tax Savings

Another significant advantage of increasing term insurance plans is the potential for tax savings. Premiums paid towards term insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, up to a specified limit. Additionally, death benefits received by beneficiaries are typically tax-free under Section 10(10D) of the Income Tax Act, providing further tax advantages for policyholders.

Helps to Achieve Additional Finance Requirements

Increasing term insurance plans offer policyholders the flexibility to meet additional financial requirements as they arise. Whether it’s funding education expenses, purchasing a home, or planning for retirement, policyholders can adjust their coverage to provide the necessary financial support for their loved ones. This ensures that beneficiaries receive the financial assistance they need to achieve their goals and maintain their standard of living.

Features of Increasing the Term Insurance

Increasing term insurance offers policyholders the option to enhance their coverage over time, providing better premiums, improved coverage, and additional benefits. Understand the key features of increasing term insurance, including better premiums, enhanced coverage, and the availability of riders for additional protection.

Better Premiums

One of the significant features of increasing term insurance is the potential for better premiums. Unlike traditional term insurance, where premiums typically remain level throughout the policy term, increasing term insurance allows policyholders to lock in lower initial premiums. As the policyholder’s age increases, premiums gradually rise, but they start at a more affordable level compared to permanent life insurance policies.

Better Coverage

Increasing term insurance provides policyholders with the opportunity to increase their coverage over time, ensuring that their insurance protection keeps pace with their changing needs. As the insured’s financial obligations grow, such as mortgage payments, education expenses, or income replacement needs, increasing term insurance allows for adjustments to the coverage amount to provide adequate financial protection for beneficiaries.

Overall Better Benefits

Increasing term insurance offers overall better benefits compared to traditional term insurance policies. With the ability to adjust coverage and lock in lower initial premiums, policyholders can enjoy greater flexibility and cost-effectiveness. This ensures that their loved ones receive sufficient financial support in the event of the insured’s passing without the burden of increased premiums or reduced coverage.

Riders

Increasing term insurance policies often allow policyholders to add riders for additional protection and customization. Riders are optional features that provide supplementary benefits, such as critical illness coverage, accidental death benefit, or waiver of premium. By adding riders to their policy, policyholders can tailor their coverage to meet their specific needs and provide enhanced protection for their loved ones.

What is Term Insurance Plan Extension, and Can Term Life Insurance be Extended?

If you’ve acquired a renewable term plan, upon reaching the end of the policy term, the insurance provider will automatically expend the coverage for another term until you reach a designated age. An advantageous aspect of renewable term plans is that they permit policy extension regardless of any diagnosed medical conditions.

How Does Term Insurance Plan Extension Work?

Term insurance functions by providing a predetermined death benefit to beneficiaries if the insured individual passes away during the term of the policy. Term insurance plan extension allows policyholders to extend this coverage beyond the original term, providing ongoing financial security for their loved ones.

Evaluation of Options

As the initial term of the policy approaches its end, policyholders receive notification from their insurance provider regarding the impending expiration. At this stage, individuals have the opportunity to evaluate their options and decide whether to extend the term insurance plan.

Extension Process

Extending the term insurance plan typically involves contacting the insurance provider or agent to initiate the process. Policyholders may need to complete paperwork or provide updated information, but in many cases, medical underwriting is not required for the extension.

Review of Terms

During the extension process, policyholders should review the terms and conditions of the extension carefully. This includes assessing any changes in premiums, coverage amounts, or additional features that may apply to the extended term.

Confirmation of Extension

Once the extension is approved by the insurance provider, policyholders receive confirmation of the new term and any updated policy documents. The extended coverage goes into effect immediately, ensuring uninterrupted protection for the policyholder and their beneficiaries.

Features of Term Insurance in India

With a range of features tailored to meet the diverse needs of policyholders, term insurance offers comprehensive coverage at affordable premiums.

• The premiums paid against term plans are considerably low, while the term plan coverage is high.
• The tenure of the term insurance is fixed.
• Term insurance coverage provides a death benefit but not a maturity benefit.
• Tax benefits can be availed as per the Income Tax Act of 1961.

Let us try to understand how a term cover (or risk cover policy) works with the help of an example: You are 25 years old and purchase a term insurance coverage for 20 years with a sum assured of one crore, and its premium is two lakhs per annum. Here, your loved ones will get one crore if something happens to you during those 20 years. However, if you outlive the term period, no amount will be given.

However, life does not always work out the way you expect it to. For example, due to inflation, the sum assured value will not be the same as it is today, 20 years from now. Therefore, at any given point in time, the expenditures will differ according to the prevailing prices in the market. Along with this, your children’s school fees might increase, or you may buy a house under a loan, thereby increasing your financial liabilities. Thus, your life cover plan must cater to these changing needs by increasing your term insurance cover.

Conclusion

Increasing your term insurance coverage is a proactive step towards ensuring the financial security of your loved ones. By assessing your current and future financial needs, exploring your options with your insurance provider, and making adjustments as necessary, you can strengthen your financial safety net and provide peace of mind for yourself and your family. Remember, life is unpredictable, but by increasing your term insurance coverage, you can better prepare for whatever the future may hold.

FAQs on How to Increase Term Insurance Cover