Six factors to consider before renewing your life insurance
When you purchase life insurance, you secure the future of your loved ones. It is a financial cover that your family can rely on in an unfortunate event where you lose your life. The benefit of having life insurance is huge, and that is why most people usually have one. When you would have bought your life insurance policy, you would have selected the cover and premiums to estimate the needs of your future. However, things may not always go as planned, and you may want to make some changes to your policy. Before you choose to renew your life cover, here are some factors to remember:
Look for any changes in policies post-renewal
Life insurance is a crucial financial instrument that affects you and your family. When you have renewed your policies, ensure that the modifications that you have made are on it. Also, read the fine print carefully and see if the insurance company has changed your policy post-renewal. If you have any doubts regarding the terms and conditions of your policy, contact your insurance provider immediately.
Change your insurance coverage based on life changes
When you had purchased your insurance before, your priorities and financial goals would have differed from now. With your life-changing and growing, your insurance coverage must keep up with the changes. You may have calculated your sum cover previously based on your life back then. Now your financial situation would be different. You may have taken more debt or reduced your debt, you may have more dependents, or your previous dependents could soon manage things on their own. Ensure that based on your current dependents and liabilities, you adjust your life cover accordingly. Take into consideration your present and future finances before selecting the insurance cover.
Consider reducing your tax burden
As you age, your salary is likely to increase. The more you earn, the more your liabilities increase. Apart from providing life cover, when you buy a life insurance policy, the biggest benefit is tax exemption. When you are renewing your insurance, consider any needs to reduce your tax burden and plan accordingly. Use a life insurance calculator to get an estimate on your premiums and their tax benefits. The premiums that you pay on your life insurance are exempt from taxes under section 80C of the Income Tax Act.
Take your present liabilities into consideration
In different stages of life, individuals take up different responsibilities. To fulfill those duties, they choose to take a loan or debt. Nowadays, living with an EMI is no exception. Be it buying your house, your child’s education, your new car, or starting your own business, you may have borrowed money to fulfill any of your financial needs. When you are renewing your insurance policy, ensure that your life cover suffices to pay your debts. This ensures that, in case of your sudden demise, your debt does not burden your loved ones.
Check the premiums and their frequency
When you are changing your policy, ensure that you can afford the premium amount with ease. The premiums keep your policy active. Failing to pay them may cause you to lose the death benefit altogether. Take into consideration your expenses, your investments, and choose a modified premium accordingly. Use a life insurance calculator to get an estimate on the premium amount. Also, according to your monetary comfort, choose the frequency of the premium payment. Usually, there are three ways you can go about paying your premiums, annually, half-yearly, or monthly.
Add any additional riders if needed
When individuals buy a life insurance policy at a young age, they are in good health most of the time. However, as they age, the chances of being diagnosed with critical illnesses increase. If you have a critical illness that you did not have before, choosing a critical illness rider is a good idea. These riders are add-on benefits that you get on your existing term plan by paying additional premiums. When you are renewing your life insurance policy, ensure that you disclose your health honestly with the insurance provider. A chronic illness may lead to a rise in premium. However, hiding the fact may lead to the claim being rejected altogether.