Did you know, just like your motor, health and home insurance policies, your life insurance policy also needs to be reviewed from time to time? Find out when to do it.
Did you know, just like your motor, health and home insurance policies, your life insurance policy also needs to be reviewed annually? It is not something that you buy just once in your life and never revisit again. As per industry experts, it is very important to review your policies periodically so that they give you maximum benefits at the time of need. Moreover, reviewing your life insurance policy annually helps you to ensure that the future of your loved ones is protected and your income earning abilities are secure despite all the life changes events you may go through. After all, the benefits of a life insurance policy are mostly for the people totally dependent on you and with any change in your life and income earning abilities, your need for protection also changes.
Here are some of the most prominent moments in life when you must review your life insurance policy:
When Your Relation Changes
A relation or relationship change refers here to a permanent relationship change, such as your marriage or birth of your child. As a rule of thumb – what experts often refer to – whenever you welcome a new member in your family, do not forget to schedule a review of your life insurance policy. This will help you to include the new person as a beneficiary of your life insurance policy. You may even choose to take a thorough account of their individual living expenses just to ensure that your total sum assured is enough for survival of all. If you feel that the sum assured you chose while taking the policy would not be sufficient, you can always enhance the sum assured by paying a little extra premium under the Life-Stage-Protection feature. You can also go for buying a new policy for yourself.
The new addition in your family can also be the aging parents who stay with you because of physical as well as financial dependence on you. It is important for you as their children take their retirement needs and expenses into account while reviewing your life insurance policy. By doing this, you ensure that your parents’ living costs will be well taken care of by your insurer in the event of your absence.
When Your Career Changes
A change in career is usually accompanied by a change in financial status of an individual. Whether you get a promotion, an increment or an unexpected bonus payout, all of these call for new financial decisions. With an increase in salary, you should always think of increasing your total sum assured to better meet your lifestyle requirements. Whenever you get a hike, make sure to review your insurance policy. However, just in case you lose a job it calls for cutting down on the daily expenses. It is never advised to pause the premium payments for any such reasons, although you can always ask your insurer to reduce the cost of premium for the current year.
When You Experience a Financial Change
When you plan to apply for a financial loan to purchase a car or home, or think of taking a personal loan for the education of your kids, do make sure to take the value of the loan’s EMIs and duration into due consideration. Moreover, you can also include different short-term debts like credit card bills into the calculation. By doing this, you can easily ensure that you do not burden your loved ones with the responsibility of paying your debts in your absence. You can always allocate a sufficient amount to service the debt in the event of your sudden death or ensure that your insurer pays for all these expense on your behalf.
The lump sum payment made against your policy by the insurer can be used by your dependents to repay your loans and other debts and the remaining amount can be used for other important expenses. However, it is very important to choose the right payout plan so that all the expenses can be done efficiently.
If you find it challenging to remember planning in advance for review of your life insurance policy, schedule an annual review. Your life insurance planner should be easily able to discuss your current and future monetary and investment needs while also sharing an update on your fund performance. You may also request your insurer for a regular update on new features or add-ons that may be suitable for your needs and requirements. By following this, you will be easily able to make an option on increase of your coverage as and when required.
(By Santosh Agarwal, Associate Director and Cluster Head-Life Insurance, Policybazaar.com)