Life insurance policy and health insurance policy are the two major pillars of every financial planning. Absence of any of the policy will completely destroy the financial plan. But simply taking the policies are not enough, one needs to make sure that the cover or the sum assured amount is sufficient to serve the purpose.
A lot of people think that once the life insurance policy is taken they can “Buy it and forget it”. But this practice does not address their future insurance needs. As we review the investment portfolio on a half-yearly or yearly basis, insurance policies should also be reviewed on regular intervals or on happening of an event, to make sure that the insurance cover taken initially 5 years or 10 years ago is sufficient or the same need to be realigned. Below are the events where one needs to review the Life Insurance Policy.
Review your Life Insurance Policy
Growing Family needs updation in Life Insurance Policy
The main purpose of taking a Life insurance policy is to safeguard and support the life of the dependents financially. So as the number of dependents grows you need to increase your insurance cover to suffice the requirement. For example, till you are unmarried your parents are dependents on you but as soon as you get married your spouse gets added into the dependent list and as you become a father the list gets extended. So it becomes necessary to review your life insurance policy at each of the events to make sure that after an unfortunate event, your family should not suffer financially.
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Considerable Change in Expenses
Life insurance cover is taken after assessing day-to-day expenses including all the debt expenses such as Home Loan EMI, Personal Loan EMI, etc. There may be chances that you have taken a major loan which was not present at the time of taking insurance policy. So you need to reassess the requirement and change the policy amount accordingly. For example, you were staying with your parents and had taken policy amounting to ₹ 50 lacs but as every Indian has a dream of owning a house, you have bought a house for ₹ 1 crore after few years of taking policy. Now as you have got a long-term liability, you will have to increase the insurance cover to at least cover the debt amount so at the time of sudden death your loved ones can hold the asset on which you have taken the loan.
Hike in Income to a Considerable Amount
As the idiom “Life keeps on moving”, you will also move ahead in your career. The income you were getting a few years back must have got increased by a considerable amount by now either due to regular hike in the salary or due to change in the job. The standard of living also changes with the change in income. This change in income results in increasing day-to-day expenses. Thus, the insurance cover you had taken shall also be reassessed to help your loved ones to maintain their current lifestyle.
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Improvement in your health
The life insurance policy premium is based on the medical conditions declared at the time of taking policy. In case there is some illness is showed in the medical reports the premium of the policy is increased. So while taking the policy one should declare the full medical details to the insurer to avoid the rejection of claim at the sudden death of an insured person. There are chances when the medical condition declared at the time of taking policy is improved over time. This improvement needs to be updated with the insurer and you could ask for the revision of the premium rates.
Modification in Beneficiaries
All the revisions are not related to monetary terms but some are related to changing the declaration such as beneficiary, nominee and bank account details. There are various instances where the change of the beneficiaries is required to be done in the life insurance policy. At the time of getting married, there is a need for updating the beneficiaries to a spouse or at the time of divorcing there is a need to withdrawing the spouse as beneficiary.
For some people changes are slow however for some people changes are frequent, therefore it is advisable to reassess your life insurance coverage on a regular basis mostly yearly basis. In case it’s been a while since you have reviewed your life insurance policy, then there is nothing like doing it today.