In a rapidly changing and highly dynamic environment of personal finance, making sure that your protection plan through your life circumstances evolves is paramount. Term insurance, which for long has been perceived as one of the easier and more economical solutions in safeguarding your family’s future, does not make it an exception to this rule. While it may be an important decision to buy the best term insurance plan, it is merely a starting point toward securing your financial future.
It is one of the major reasons why having a review of your term insurance policy is very important.
1. Life Changes Call for Adjustments in Coverage
The first most apparent reason is that one always undergoes some form of life changes that will take place over time. These could be in the form of marriage, birth of children, taking up a different career, or perhaps a house that will require changes in one’s financial obligations and responsibilities.
For instance, after getting married or having children, you are liable to assume greater financial responsibilities. Periodic policy reviews will help you to modify your coverage in keeping with such major life events. Similarly, if the income is going up because of a career change or business success, then it is necessary to increase the coverage.
2. Inflation and the Increasing Cost of Living
Inflation is a time factor that slowly eats away at the purchasing power of money. What was a good amount of coverage when you bought your policy might not be enough to cover expenses in the future, especially in the case of a claim. For example, the cost of raising children, healthcare, and education has risen sharply in the recent past.
Review your term insurance policy to determine if the coverage amount needs to be increased to avoid inflationary erosion. In general, insurers offer the flexibility of periodic increases in the sum assured on your policy or linkage of your policy to inflation rates so that the cover is indexed to increase along with inflation.
3. Check out the Claim Settlement Ratio
The claim settlement ratio of an insurance company is a very important measure to assess the dependability and transparency of the insurance entity. It represents the number of successful claim settlements by the insurer to the total claims made in a given year. The higher the claim settlement ratio, the better the commitment of a company to repaying its liabilities and clearing claims.
When reviewing your policy, it is imperative to ensure that the claim settlement ratio of the insurer has increased or decreased. Therefore, if the ratio has decreased, then it might depict a problem with the financial stability of the insurer or the way the insurer treats its customers.
4. Changes in Tax Laws and Other Financial Regulations
Government policies and tax rules keep changing and may have a bearing on your insurance policy. For example, tax exemption rules under Section 80C, which you claim for paying the premium of your term insurance, may change or some riders or benefits might be restructured. Reviewing your policy will always keep you informed about any such changes and let you make suitable adjustments to your strategy.
Moreover, any changes in the financial regulations, relevant to life insurance, can be known and allow for the full use of available benefits, such as tax savings, and avoid potential issues during claims.
5. Your Health Status Might Affect Your Premiums
In term insurance, the first time you buy a term insurance policy, you are bound to undergo a medical examination and your premium rates are determined by your health status. However, over time, your health might change, affecting your insurance needs or premiums.
Therefore, if your health has improved enormously, you must be able to get a very low premium while renewing, or even improve your insurance coverage. On the other hand, if an illness or significant lifestyle change affected your condition, it makes sense to examine the policy again to ensure you have adequate cover in place in case of emergencies and other medical risk events at the earliest instance possible.
6. Evaluate Your Riders and Add-Ons to Get Improved Coverage
There are a number of add-ons or riders which can be taken along with the term insurance policies so that the scope of coverage becomes wide. These riders may include critical illness coverage, accidental death benefit, or even waiver of premium in case of disability. While these riders might be very protective, it is very important to scrutinize whether they are still relevant to your current situation.
As you grow old, you will realize that you are interested in adding critical illness coverage to reduce your medical cost incase you contract a fatal health condition or perhaps remove certain riders, say the disability rider so as to minimize your cost.
7. Comparison with the Best Term Insurance Plans
Insurance products and innovations always come out. Maybe at the time you chose a term insurance, that was the best one at that time. After some time, others may come in with more effective policies or better premiums, so reviewing and updating the same ensures you keep your existing one up to par with newer versions available in the market.
If you find a better option, you can either upgrade your policy with your current insurer or switch to another company altogether. But do not forget the costs of switching, like waiting periods for certain benefits, like critical illness or medical coverage.
8. Peace of Mind and Financial Confidence
It brings peace of mind to review your term insurance policy regularly. Indeed, the peace would come with knowing that you are well protected through an accurate coverage that reflects the actual financial obligation to your family and yourself. In case this happens unfortunately, your loved ones would be sure of being in good financial stead without much disorganization in their lives.
It also increases confidence on the finances as one is assured of his policy to be still in working condition and, therefore, help in solving ever-changing financial conditions.
Conclusion
Term insurance: A tool for force to safeguard the future for your family rather than a ‘set and forget’ strategy: The regular reviews made on the policies make it all the changes it has in the life.
After all, the best term insurance plan isn’t the one you buy once and forget about it is the one that evolves with you and provides comprehensive protection at every stage of life. So, make it a point to review your term insurance policy regularly and make adjustments that best serve your family’s future.