You have already got your life insured. But are you also reviewing your cover from time to time? This is important. For, in this world of uncertainties, remaining uninsured or underinsured may land you in serious trouble one day.
Experts feel that apart from exigencies, there are certain stages in life when one may need to review one's life cover. In the early stage of life, for instance, when one has just started off one's career and started earning, there is no real need for life insurance—unless one has financial dependants. The more compelling insurance need at that stage is for a personal accident cover, which covers the risk of accidental death.
However, circumstances undergo a sea change in late 20s or early 30s when someone matures and gets married.
After marriage one needs to review one's coverage to take adequate life cover in a bid to protect one's spouse and family from the risk of premature death. While this applies to both men and women in the age where both genders are often in an active working population, traditionally, advice is given on the assumption that the man is the main breadwinner who needs to plan out things for the family.
In the case of men, if the spouse is working, then her income earning capacity also needs to be protected and if she is a housewife, she needs to be given adequate protection, which could safely tide her over any financial crisis that might occur in the absence of the breadwinner. At this stage, whole life policies and term plans are considered good to protect the breadwinner as well as his family.
Insurance coverage needs to be reviewed again when one has kids and it's time to save something for their future requirements. "As insurance also provides cover for foreseen future expenses such as children's education, marriage or setting up a business for them, it's advisable to go for a suitable plan and take adequate cover for your child depending on their future needs," says Vivek Khanna, director, marketing, Aviva India. Therefore, it would be advisable to increase your life cover by taking additional term plans and invest the surplus money in some high-return investment schemes like a ULIP (Unit Linked Insurance Plan).
As the person grows older, he starts accumulating assets on loans, like buying a dream house or a car. This also increases his liabilities, which acts as a trigger to go for a larger or new insurance cover. "If someone has a large amount of liabilities, he should increase his insurance cover. There are policies, which cover the liabilities of a person and pay all the liabilities if something happens to the insured. Hence the burden is transferred to the insurance provider, and not to the family of the insured," informs Ashish Kapur, CEO, Invest Shoppe India Ltd. In this case, you can either opt for a mortgage cover plan to cover the home loan or take a term plan for the same.
Besides, as the income grows, one is often induced to look for additional cover to take care of one's future needs. For instance, someone getting Rs 10,00,000 earlier would surely like to at least double his cover if his income grows to Rs 20,00,000.
Experts, however, suggest that while taking care of your liabilities, you should also take stock of all your plans and if you have some unmanageable life policies, it is better to junk some low-cover, high-premium policies and take a huge term plan instead to cover your liabilities and additional needs. In other words, one should also keep one's premium paying capacity in mind and should never go for any cover blindly. If not, one may just end up adding unwanted and lapsed policies to one's portfolio!