Life Insurance Coverage: Can You Increase It After Buying A Policy?

Life insurance coverage ensures that a policyholder’s family remains financially secure. Its payout supports multiple needs, such as children’s education, their wedding expenses, and even loan repayments.

However, the sum assured may not cover almost every cost related to the benefit that is paid out later. This may be due to rising inclination, increasing expenses, or other circumstances. Now, the question is whether one can increase life insurance coverage after buying a policy. This guide discusses the same brief in detail.

Can You Increase Cover On An Existing Life Insurance Policy?

When a person purchases a life insurance policy, the coverage is calculated on the basis of their income and existing liabilities. However, certain circumstances may force the person into thinking about increasing their sum assured during the policy term. The possibility depends on the specific policy bought by the policyholder.

Generally, life insurance plans can be categorized into the following types.

Term Insurance Plans

These are the most common life insurance plans available in India. Unfortunately, they do not allow policyholders to increase the sum assured mid-term. Once someone has locked their cover, say ₹1 crore, it stays fixed for the policy tenure unless the plan itself has built-in increasing cover.

This feature is important in this discussion because some insurers do add it as an additional benefit for policyholders. An increasing cover or future proofing option allows the sum assured to go up at certain life stages, such as marriage or the birth of a child. No one needs another round of medical underwriting to avail of the fresh sum assured in this case.

The only con is that most increasing term cover options have a specific cap on the cover that can rise in the future.

Endowment and Whole Life Plans

Term insurance plans still have an alternate option to increase the sum assured for policyholders. However, traditional endowment and whole life plans are more rigid in this case.

The sum assured remains the same for the entire term, and there is no option for the person to increase it later. If anyone still wants more cover, they need to buy a fresh policy or choose a rider that offers such an option.

Unit-linked Insurance Plans (ULIPs)

ULIPs are more flexible in the context of increasing the sum assured options for policyholders. Some of them, including ICICI Prudential life insurance plans, allow policyholders to increase their coverage with certain limits during the policy term.

However, even this change is subject to underwriting and other terms specified in the ULIP policy document.

That doesn’t deter anyone from the fact that ULIPs are an excellent option for people whose income and responsibilities are expected to grow quickly.

What Are the Options if Your Plan Doesn’t Offer an Increase?

Policyholders still have a few practical options to choose from if their current life insurance policy doesn’t offer an increase in the sum assured. These are:

Buy a Top Up or New Term Plan

A top up is an additional insurance plan that is available for purchase alongside the existing life cover. They allow the policyholder to pay an extra premium to increase their sum assured without buying a new policy. The other alternative, as discussed earlier, is to buy a new policy with an increased sum assured option.

Add Riders When Possible

A term insurance rider is an additional option that policyholders can opt for alongside their plan. It can be either built-in or bought by paying an additional premium to help maximize the life insurance coverage. The most recommended riders are usually the accidental death benefit or critical illness riders.

Review at Maturity

If a policyholder’s plan is nearing the end of its term, they can reassess their life insurance coverage and buy a larger policy. The only thing to make sure of is that the sum assured is enough to handle the financial liabilities of the family members if something happens to the policyholder.

Talk to an Advisor

No one knows insurance better than professional advisors who work with customers almost regularly to cater to their respective needs. Policyholders can approach these advisors to learn more about the policy wordings that can vary across insurers. These professionals can also provide them with alternatives to increase their sum assured options.

How Much Cover Does One Person Actually Need?

There is no specific amount that suffices a policyholder's interest because it always varies from person to person. However, as a rough rule, advisors recommend considering a sum assured that is at least 10 to 15 times a person’s annual income.

Anyone can adjust the life insurance coverage accordingly with outstanding loans and future goals like the policyholder’s retirement or a child’s education.

However, this is only a starting point for many individuals. A person with an outstanding home loan and two children will need more coverage than someone who is single and lives in a rented apartment.

The only mistake to avoid is considering the sum assured of the existing policy as final. Reanalysis of priorities matters in this case, and life insurance coverage should always reflect a policyholder’s responsibilities.

Checking Life Insurance Coverage Across Plans

A policyholder always wants to make the most of the life insurance plan they purchase for their needs. However, not every plan has the provision to increase the sum assured, something that we learned in this guide. The best resort is to double-check the plan’s brochure and policy wordings before purchasing it.

If a person expects an increase in their sum assured after purchasing the policy, the best option is to go for a product with the increasing term insurance feature. Alternatively, reevaluating the policy at renewal is also an option worth considering in this case.

Any life insurance advisor can also help the policyholder with these queries if they are not able to make an informed decision.

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