Our financial situation is subject to change on a regular basis. There might be an increment or even a decrease in income during one’s lifetime. So, it would be difficult to determine the sum assured when we choose to buy a term policy because our income does not remain the same.
These days, the rate of inflation is pretty high and so a higher coverage may be needed to provide security to the beneficiaries. Additionally, with time, your responsibilities also increase. You may also have a car, home, or business loan now. Thus, if you are considering buying another term plan to meet such lifestyle changes with increased annual income, then you are on the right track. You may want to check your eligibility for a higher cover with the insurer before buying.
However, to increase the life cover, you have several options, including to ask your insurer if the current term plan provides such an option. Or look for another term plan to meet your needs.
So what, if our income increases after we have already invested in one term plan?
What are the Options to Increase the Sum Assured?
If you want to increase the sum assured in your term plan, you have the following options -
1. Consult your Insurer
The first thing you need to do when you want to increase the sum assured in your term plan is to consult with your insurer. You may already have provisions in your current plan to increase the sum assured such as Life Stage event increasing cover. This may allow you to get a higher cover without buying another term plan.
2. Term Plan with increasing Cover
In case your existing term plan does not have the provisions to increase the sum assured, you can go in for a term plan with an increasing cover. Those who have a preference for term plans may opt for an increasing term insurance plan wherein the sum assured chosen at the commencement of the plan increases every year by a specified amount. However, the rate of increment(usually 5%-10%) of the sum assured is mentioned beforehand and remains the same throughout the plan tenure. The rate of increment is expressed in the form of a percentage (%).
Is it possible to change the specifications of my current term plan?
Once bought, the specifications of a term plan cannot be altered. Unfortunately, term plans don’t offer this kind of flexibility.
Can a Person Hold Multiple Term Plans?
According to experts, one person can invest in multiple term plans because the financial goals of every person vary from individual to individual and are subject to change. There is no restriction in terms of the number of term plans a person can buy. In fact, having two term plans assures higher coverage. But, the potential policyholders must always take their financial requirements into consideration. Besides, they must be able to afford to pay premiums for multiple term plans.
Should I Buy Another Term Plan From the Same or Different Insurer?
There are no hard and fast rules regarding the insurer from whom you get your term plan. You may choose to buy another term plan either from a different insurance company or from the same company. But before doing so, you should always consider one thing, i.e. which one would be more beneficial to opt? It is only your or your family’s own financial requirements which you should keep in mind before buying term plans. Besides, you must ensure which insurer or which policy will offer more benefits in terms of coverage, the premium to be paid, riders and so on.
A person’s financial situation may change in course of their lifetime. They may choose to invest in insurance policies accordingly. In case their preferred policy happens to be term policy, they must keep in mind that once determined, the specifications of a term plan cannot be changed. However, they can buy more than one term plans depending on the financial needs of their family in case they pass away all of a sudden. There is no hard and fast rule surrounding how many term plans one chooses to buy or from which insurer they choose to buy.