4 Reasons to Review Your Life Insurance Policy Regularly

For a lot of people, getting life insurance becomes a one-time investment that needs no further pruning with the passage of time and growing needs. However, to think that life insurance can be bought and forgotten, without upgrading them as per our changing needs is a false notion. Life Insurance policies are purchased with the intent of protecting one's family and loved ones in the unfortunate event of their untimely demise. But in our ever-changing lives, our needs and necessities vary from time to time. It is essential to address our future needs and reconsider our life insurance plans regularly.

The need for addressing future insurance requirements is of primary importance. Hence, a policy that you may have purchased 5 or 10 years ago might not offer benefits that align with your present needs. Experts recommend that periodic reviews of life insurance policies are very important as they help you decide if your policy's coverage is still relevant to your financial position. As a matter of fact, most financial advisors advise reevaluating life insurance policies on an annual basis. The primary reason for this is the impact of changing times on our day-to-day needs.

Evolving Policy For An Evolving Life

While most people do not realise, our needs change radically as we grow. Hence, it gets essential to adjust our life plan with each significant change in our life. Lifestyle changes take place more frequently than we realise and that is why we must reassess our life insurance coverage regularly. This not only keeps us aware of our changing needs and requirements but also helps us make optimum use of our policy. So, if you have not reviewed your life insurance policy in a while, today is a great day to do the needful. Let's look at some compelling reasons to reassess your life insurance policy.

1. The Family Grows

Starting a family, getting married, or having children are among the most significant changes, with far-reaching effects. After such changes, the lifestyle of the concerned family members changes, both financially and mentally. This paradigm shift in the lives of those involved makes reviewing the life insurance policy mandatory. So whether you marry someone, have your first child, your responsibilities will change, as will your priorities. After such changes, most people make it a point to get adequate life insurance for their families to cover them in the event of their untimely death. In such cases, the insurer pays for important expenses of those left behind, such as children's education, paying off existing debts, etc.

The estimated cost of raising a child from its birth until they turn 21 is about Rs 20-25 lakh on an average. Ever wondered how this amount of money will be arranged in your absence? As your family grows, it is wise to increase your life insurance coverage amount. In case you feel that your present sum assured is inadequate to meet your family’s growing needs, you have the option of enhancing the sum assured by paying an extra premium.

2. Getting New Mortgage

Buying a house of your own is perhaps still the biggest conventional asset in India. At the same time, it is often the largest financial responsibility. It is advisable to buy a term life insurance plan for at least the same amount as your mortgage. This way, in case you pass away while the ‘term’ of the policy is still in force, your family will be able to pay off the mortgage. For example, if you buy a new property with a mortgage of Rs 3 crore, and you own a life insurance plan worth a death benefit of Rs 1 crore, you will have to update your life insurance policy. That's because a mortgage is a massive obligation. However, after your death, the home loan will become a problem for your spouse or family members. Therefore, updating your sum assured to the amount of mortgage will leave your family debt-free.

3. Career Trajectory Change

With time, your career trajectory ascends, making changes in your income for the better. Such changes usually result in a shift in the financial status of individuals. Hence, whether you get a promotion or hike in salary, these changes pave the way for new financial decisions. That is why, each time you change your job or undergo a hike in your salary, reviewing your life insurance policy is a must. It not only helps your family maintain their ongoing lifestyle but also gives you the opportunity for systematic investments.

4. Beneficiary Change

You may have to change your beneficiary depending on the various situations of your life. For example, getting married could lead you to update your plan and add your spouse as a beneficiary. Similarly, in the event of a divorce, you may want to withdraw your former spouse as a beneficiary from your policy. Therefore, it is crucial to review your beneficiaries from time to time and ensure that you have the right people covered under your policy. Neglecting the same could lead you to unpleasant situations and put your death benefit in the wrong hands.

Therefore, reviewing your life insurance policy at regular intervals is a wise practice that helps you keep track of your financial needs and how well your insurance policy can fulfil them. So keep updating your life insurance policy with the changes in your life and make the best use of your selected policy.