Digit Glow Term Life Insurance

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Why Should You Review Your Term Insurance Regularly?

Regular review of a term insurance policy is a critical financial practice that ensures the adequacy and relevance of coverage in response to evolving personal and family circumstances.

This process involves systematically reassessing the policy to account for significant life events, such as marriage, childbirth, career changes, or increased financial obligations, and making necessary adjustments to the coverage amount, duration, or beneficiaries.

Scope of Review:

Evaluate changes in household income, expenses, and liabilities
Assess the adequacy of existing coverage relative to new dependents or responsibilities
Determine the need for policy extension or enhancement
Update beneficiary designations and contact information

Read on to learn when and why you should review your term insurance policy and other crucial aspects.

Why You Should Regularly Review Your Term Insurance Policy?

Here are some of the reasons why you must update your term insurance policy from time to time:

New debts: If you’ve taken a home loan, car loan, or any other debt, increasing your cover ensures your family won’t be left with repayments.
Growing responsibilities: Marriage, children, or dependent parents mean higher financial needs. Your policy should match these life stages.
Changing priorities: You may want to update or change your nominee so that the right people are protected.
Inflation impact: What seems enough today may not be sufficient tomorrow. Raising your sum assured helps keep the cover relevant.
Insurer reliability: If your insurer’s claim record or reputation is slipping, switching ensures your family’s financial security stays intact.

When to Review Your Term Insurance Policy?

A term insurance plan is not something you buy once and forget. As your life progresses, your responsibilities and financial commitments evolve. Reviewing your policy at the right times ensures your family remains adequately protected and that your coverage matches your actual needs.

Change in Marital Status

Marriage: With a spouse now dependent on you, your insurance coverage should increase.
Divorce or separation: You may need to update your beneficiaries and adjust your coverage as responsibilities change.

Parenthood / Change in Family Size

Birth or adoption of a child: The birth or adoption of a child results in higher long-term financial obligations, including education and healthcare.
Grown-up children: As children become financially independent, you may reassess and scale back your coverage

Buying a Home or Taking a Loan

Home loan or major debt: Insurance should be sufficient to cover outstanding liabilities so your family isn’t burdened.
Clearing off debt: Once loans are repaid, you might not need the same level of cover.

Career and Income Changes

Salary hikes or promotions: As income and lifestyle rise, your insurance cover should keep pace with higher financial goals.
Job change or loss: A shift in your risk profile or reduced affordability may necessitate a reevaluation of your plan

Changes in Health Status

Health improvement: If you quit smoking or adopt a healthier lifestyle, insurers may offer better terms, making it a good time to review your cover.
New medical condition: While increasing coverage may be challenging, you should still evaluate whether your current plan meets your family’s needs.

Periodic Review

Even without significant life changes, it’s wise to review your policy every 3–5 years to account for inflation, lifestyle upgrades, and new insurance options.

Other Triggers

Shifts in long-term financial goals, such as planning for children’s overseas education.
Growing responsibilities like caring for elderly parents.
Significant changes in assets or investments that alter your family’s reliance on insurance.

How Often Should You Review Your Term Insurance?

You should review your term insurance policy at least once a year.

An annual review helps ensure your coverage still meets your family’s financial needs. It’s a chance to explore new policy options, adjust your sum assured, and clarify any concerns about premium rates. Regular check-ins also allow you to update personal details and make changes before your policy expires, keeping your protection relevant and reliable.

How to Review Your Term Insurance Policy?

Here’s how to review your term insurance policy effectively:

Check if your sum assured still matches your current financial & family commitments; increase or reduce if needed.
Re-evaluate attached riders/add-ons (critical illness, waiver, accidental death); drop or upgrade them based on changing risk exposure.
Verify premium affordability; ensure continuing payments won’t strain your budget, especially with lifestyle changes.
Review policy terms & exclusions, claim history, and whether porting or switching to a better plan makes sense.

Things to Evaluate Before Updating Your Term Life Cover

Here are some of the things you must consider while reviewing your term insurance policy:

Policy Period

Ensure your policy lasts through key financial obligations to extend or supplement coverage if needed to maintain protection.

Add-ons

Consider adding riders like critical illness, premium waiver, or accidental death to strengthen your policy and cover specific risks.

Sum Assured

Ensure your sum assured covers debts, education, and retirement. Use a term insurance calculator to pick the right coverage and secure your family’s future.

Premium

Make sure the premium for your term insurance policy still fits comfortably within your current budget, especially if there have been recent shifts in your financial situation. If your income has increased, you may want to consider policies with enhanced benefits for better protection of your family, even if it comes at a higher cost.

Tax Benefits

Tax benefits under Sections 80C and 10(10D) of the Income Tax Act allow premium deductions and tax-free payouts to nominees. Regularly reviewing your term insurance ensures you maximise these benefits and align the policy with your overall tax planning strategy.

Insurer’s Reputation

Knowing an insurer’s claim settlement ratio and customer service quality is crucial. A high claim settlement ratio reflects the insurer’s reliability and commitment to honouring claims, indicating trustworthiness and efficient support during the claim process.

What are the Risks of Not Reviewing Your Term Policy?

Ignoring the timely term insurance policy review can expose you and your family to several risks:

Inadequate Cover: If your sum assured is not periodically updated, your loved ones may face a shortfall in coverage at the time of need.
Outdated Beneficiaries: Old nominees may lead to claim disputes and complicated legal issues.
Missed Add-Ons: Failing to consider new riders or benefits introduced by insurers may result in inadequate protection.
Loss of Tax Efficiency: Unchanged policies may prevent you from availing of the maximum tax benefits if rules change.
Debt Burden: Unaligned policy covers may leave the family with substantial loans, especially for new liabilities taken after policy purchase.

Select the Right Term Insurance Riders

To increase coverage, look for a plan that allows add-on riders. By adding further protection, such as accidental death benefits or critical illness coverage, these riders can enhance your insurance for a modest additional cost

Single parents should consider the following riders:

Critical illness rider to cover medical emergencies.
Accidental death rider for added financial protection.
Disability rider in case of loss of earning ability.

These riders help address broader risks, offering comprehensive security for the parent and child.

FAQs about Reviewing Term Insurance

What does reviewing a term insurance policy mean?

Reviewing a term insurance policy means checking if your current coverage suits your evolving financial needs, goals, income, and family size to ensure adequate protection for your future.

Why is it necessary to update your beneficiaries in a term insurance policy?

It is necessary to update your beneficiaries in a term insurance policy to ensure the death benefit goes to the right people as your life changes. Life events may change your intended recipients, preventing disputes and delays in claims. Keeping beneficiaries current also avoids legal complications and ensures your protection aligns with your present family situation.

How can I update my term insurance policy?

To review your term insurance, reflect on any recent life changes like a new child, increased earnings, or new loans. Assess whether your coverage meets your family's needs. If not, consider discussing with your insurer the option to increase your sum assured or add riders.

Can I add new features or riders to my term insurance policy while reviewing it?

Absolutely. Reviewing your policy provides an opportunity to add new features or riders, such as critical illness coverage or accidental death benefits, to enhance your overall protection.

How do life events impact my term insurance needs?

Major life events, such as marriage, having children, or buying a home, can increase your financial obligations. Reviewing your policy lets you adjust coverage to reflect these events and maintain proper protection.

Should life insurance policy reviews account for inflation?

Yes, inflation and lifestyle changes can affect the value of previous insurance coverage. Reviewing your life insurance policy allows you to adjust the sum assured, ensuring coverage always meets your family’s future needs.

What risks do I face if I don’t review my policy regularly?

You may risk insufficient coverage, outdated nominee information, or missing new policy features and riders. These gaps could leave your family financially vulnerable in your absence.

When should I review my existing term life insurance policy?

It’s best to review your term insurance policy yearly or after significant milestones, such as marriage or having a child. This ensures your coverage always matches your current life stage and evolving future goals.

Does updating a term insurance plan increase the premium amount?

Updating your term insurance plan does not automatically raise your premium. However, if you increase your coverage or add riders during the update, your premium may go up to reflect the expanded protection.

What is the importance of periodically reviewing a term life plan?

Periodically reviewing your term life insurance ensures your coverage stays aligned with changing life events, financial goals, and responsibilities. It helps adjust the sum assured, add riders, update beneficiaries, and maintain adequate protection for your family’s future needs.

Should I review my term insurance every year?

Yes. It’s a good practice to review your term insurance annually or whenever a major life event occurs—such as marriage, childbirth, buying a home, or taking on new financial responsibilities. This ensures your coverage always matches your family’s needs.

Can I add riders when reviewing or updating my term insurance policy?

When reviewing your policy, you can enhance protection by adding riders such as critical illness cover, accidental death benefit, or waiver of premium. These add-ons make your policy more comprehensive and tailored to your specific risks.