The Long Read
Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)
Yes, you can if you have any of the following types of term plans.
Term policy with life stage increment option: These term policies allow you to increase your life cover at a specific life stage (such as marriage, childbirth, etc.). The life stages are decided by the insurer. The premiums increase if you opt for an increased cover.
Increasing life cover term policy: In this term policy, your life cover increases every year by a fixed percentage until it reaches a maximum value (typically decided by your insurer). You don’t need to connect with the insurer to increase your life cover because it increases automatically every year. Premiums in these policies remain the same throughout the policy period.
If you don’t have any of the above plans, then you have to buy a new term policy with the additional cover amount that you are trying to get.
Check now if your current life cover is enough or not.
If you have understood that your life cover is not enough, you may think right away about increasing it to meet your adequate life cover target. You can do so in these ways:
If you have a term plan with life stage increment, you should connect with your insurer to increase your life cover at that specific life stage where the increase is allowed
You don’t need to do anything if you have a term plan with increasing life cover as every year the plan’s life cover will increase by a fixed percentage until it reaches a maximum value. You don’t have to re-take medicals as well just to increase your cover
If you don’t have any of the aforementioned plans, you can buy a new term plan
The following are the benefits of an increasing life cover term insurance plan:
This plan helps in securing the financial future of your family
The increasing cover can help you with your changing lifestyle (let’s say your expenses have risen)
The life cover increases every year, you don’t have to connect with your insurer to increase the cover
Premiums remain the same throughout the policy period
Remember this formula.
Life cover = Number of years you plan to work for x Your Total Current Annual income*
*It is the pre-tax annual income that you earn by actively working, aka the income that’ll stop coming in if you’re not around. It includes your salary and business income but not any rental income, interest, and dividend.
This formula will give you the life cover that is adequate for your needs. Now subtract your current life cover from this, if the result value is positive, you need to increase your current value by the result amount. Let’s take a simple example to understand this. Let’s say your current life cover is ₹ 2 crore. Your annual income is ₹ 7 lakhs and you have covered yourself for 30 years. Your adequate life cover should be 7 x 30 = ₹ 210 lakhs or ₹ 2.1 cr. Now subtracting the current life cover from the adequate life cover amount (₹ 2.1 cr - ₹ 2.0 cr), you get ₹ 10 lakhs. I.e. you are underinsured by ₹ 10 lakhs. You need to increase your life cover by ₹ 10 lakhs. You can do so by connecting with your insurer and checking what can be done or you can buy an additional term policy with ₹ 10 lakhs cover.
Alternatively, to check if you’re underinsured or not, you can take our underinsurance checker tool.
Some insurers may offer you the following types of increasing life cover term plans:
Annual increase of 5/8/10% till the life cover becomes twice
Annual increase of 5% till the policyholder becomes 55 years
Annual increase of 5/10% till the policy ends
Typically, insurers will give you the option of choosing your life cover in the term plan application form. The life cover you buy should be such that it's enough for your family to overcome any financial difficulties/maintain their current lifestyle, post your demise. You don’t need to follow any thumb rules or complex calculators to calculate your life cover. Instead, use the simple formula below:
Life cover = Number of years you plan to work for x Your current annual income*
*It is the pre-tax annual income that you earn by actively working, aka the income that’ll stop coming in if you’re not around. It includes your salary and business income but not any rental income, interest, and dividend.
For example, if your current annual income is ₹ 7 lakhs and you plan to get yourself covered for 30 years, then your life cover will be 7 x 30 = ₹ 210 lakhs or ₹ 2.1 cr.
Alternatively, you can also use the KlarifyLife Term Guide to calculate your life cover.
Yes, you can do so but before you do that, you can check whether your current plan allows you to increase your life cover or not. If your current plan:
Is a life stage increment plan, then you can request your insurer to increase your life cover when you’re at a certain life stage. What life stage you can increase the plan will depend on your insurer. Your premiums may increase when you increase your life cover.
Is an increasing life cover plan, then you don’t have to do anything as your life cover will keep increasing every year automatically by a fixed percentage until it reaches a certain maximum value. You don’t have to connect with the insurer to increase your life cover and your premium won’t increase after your life cover increases.
If your term plan doesn’t have any of the above features, then you can consider buying a new term plan to meet your life cover requirements.
This is dependent on a measure called Human Life Value (HLV). You need to check with your insurer to understand what your HLV is. Typically an insurer or insurers (if you’re buying multiple term policies) will check what your HLV is and they’ll ensure that you’re not insured more than what it is. That’s why it's important to reveal information about your existing life insurance policies to your insurer. For example if your HLV is ₹ 50 lakhs and you already have a term policy with life cover of ₹ 25 lakhs then you’ll be offered a life cover of maximum ₹ 25 lakhs by an insurer if you plan to buy a new term policy from them.
Unfortunately, you cannot decrease your term life cover after buying a term plan. If you need to decrease your life cover, you will have to cancel your current plan and buy a new plan with a lower life cover.
You’ll have to check with your insurer if you are allowed to do this. In most cases, you won’t be allowed to do this. So if you need a higher rider cover than your existing one, you will have to buy a new term plan and apply for the same. However it may vary from insurer to insurer so it’s best to check and confirm with your life insurance company.
See, it could be likely that your lifestyle changes when you become older. For example, your responsibilities may increase or you start earning more, your standard of living increases, which could result in more expenses or financial liabilities. The life cover you may have taken at your earlier life stage may not be enough to secure your family’s financial future and maintain their standard of living in the future, if your lifestyle changes. Further, your life cover may be more than required if you have lesser liabilities to take care of in the future. That’s why, at regular intervals or when you feel your lifestyle has changed, you need to check if your life cover is enough or not.
It’s a type of a term plan that allows you to increase your life cover at a specific life stage (such as marriage, childbirth, etc.). The life stages where you get to increase your life cover are typically decided by your insurer. The stages may be:
Marriage
Childbirth (1st and/or 2nd child)
Taking a home loan
Child’s education
These plans can become useful especially if your lifestage has added more financial responsibilities for you. For example, if you are expecting a child, you may have to plan for the costs you’ll incur for their upbringing and education. Your current life cover may not be able to cover all those costs if you pass away unexpectedly. Increasing your life cover can help you do so. In these plans, if you feel like increasing your life cover at a specific life stage, you’ll have to connect with your insurer to do the needful. Note that your premiums will increase if you opt for an increased cover.
No, you don’t need to go through the application process again. These types of term plans can come in handy when you’re experiencing significant changes to your lifestyle during a particular life stage. For example, when you buy a home and have taken a home loan to do so, you have an added responsibility of paying off the home loan. If you unexpectedly pass away before you pay off the loan, your loved ones may lose the home. But, if you have a life stage increment term plan, you can request for an increment in the life cover when you buy the home. Even if you pass away, your life cover payout will help towards clearing the home loan.
Typically for these types of plans, insurers allow you to increase the life cover at the following stages*:
Marriage
Childbirth (1st and/or 2nd child)
Taking a home loan
Child’s education
*May vary from insurer to insurer
In increasing cover term insurance, your life cover grows every year by a fixed percentage until it reaches a limit beyond which it doesn’t grow. These plans may be suitable for people who think they may have increased financial liabilities in the future.
See, being underinsured is a bigger risk than paying a high premium. Nothing is bigger than securing your family’s financial future, so, we advise you to still buy a new term policy. But, there are still some steps you can take to save on term plan costs, even if you bought your term plan in your 40’s:
Cover yourself only till retirement. An unnecessarily long duration can make your premiums high.
Get only an adequate life cover and don’t overinsure. A higher cover can result in higher premiums.
Add only those riders that are essential for your needs. Adding unnecessary riders will push your premiums higher.
Choose a premium payment term that is comfortable for you to sustain. Don’t choose the one that can be hard on your budget.
If you know what you need to buy, consider buying a term plan online. It can give you a discount as compared to buying the same plan offline.
Compare term policies from different insurers and choose the best value for money option.
Find out more on saving term insurance costs when you buy a term policy in your 40s.
We advise you to do this. Firstly, check if you are underinsured or not. You can simply do so by taking the KlarifyLife underinsurance checking tool. Now, if you are underinsured, consider increasing your life cover. If your current term plan doesn’t allow you to do this then buy a new term plan with the additional cover amount. If you are not underinsured, then congratulations, you don’t need to increase your life cover.
See, investments may or may not yield the required results. If your financial responsibilities have increased (such as you got married or you bought a house using a loan) your current life cover may not be able to meet these increased responsibilities if you’ve passed away and depending on your investments for the same may not be a wise idea. That’s why, if your responsibilities have increased, consider evaluating your life cover and increasing it. The increase in life cover would help in meeting your increased financial responsibilities when you pass away unexpectedly. When it comes to protecting your loved ones, it’s better to go with a guarantee than just hoping for the best with your investments.
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