When it drizzles, a hanky over your head probably suffices. When it pours, you probably pull out your umbrella. But, when it is pounding, you’d better pull on your rain-sheeter and scramble for the nearest cover.
Insurance is no different. Here are some good God-given reasons why you’d re-evaluate how much cover you need.
Increasing number of dependents
A change in the number of your dependents requires a re-evaluation of your insurance coverage. Some examples of this include getting married, giving birth to a child or when your aged parents retire and become dependent on you.
In fact, when you get married, not only should you increase the coverage amount of your life insurance, but you could also look at other forms of re-evaluating your insurance, which can bring down premium levels.
For example, taking a family floater health insurance policy or combining both your car as well as your spouse’s car under a single car insurance policy can help save on premium costs.
If you have taken a long term loan in the recent past – say a home loan – you would do your dependents a sizeable favour by increasing your insurance cover.
Need a reason? Think if you’re gone (you’re not going to live forever, are you?)
If your family or dependents are unable to service the home loan in your absence, the lender has the right to sell your property and recover the loan. If this property is where your family lives, then they might be rendered homeless due to the simple fact that you failed to re-evaluate your insurance needs.
Not a pleasant thought, right?
Now, that you know you have to re-evaluate when required, do include all liabilities when you consider revision of insurance.
Change in family situation
Sometimes, there may be a change in the family situation that might require you to increase your insurance cover. For example, if your spouse ends up without a job, or is unable to work, you might want to leave him a larger corpus to compensate the lack of earning capacity.
Similarly when you hold both an employer’s group health insurance policy and a secondary health insurance policy, you may want to increase the secondary cover if you wish to retire earlier than planned, to boost your overall health cover.
Change in career or income levels
If you are earning a substantially higher income than what you did when you initially bought the insurance, there will be a need to re-evaluate your insurance needs. This is because you may be enjoying a more expensive lifestyle, and your sudden demise should not burden your loved ones financially.
Adverse reports about the insurance company
If you begin to hear bad reviews about your insurer, it may be time to re-evaluate your policy and explore if you can shift to another insurer. One important factor to look out for in this respect is the Claim Settlement Ratio of insurers. Consistently falling settlement ratios over the years or adverse reports about your insurer indicate a need to re-evaluate your insurance needs.
Tax saving opportunities
In case if you are not making full use of the tax benefits available to you under the Income Tax Act, you could consider increasing your insurance coverage amount. A higher insurance cover means a higher premium, which in turn will give you a higher tax benefit.
Although this could be one scenario when you would re-evaluate your insurance needs, it may not be a very critical reason for you to do so. Further, there are other tax-saving avenues which are available under the Income Tax Act.
Additional Reading: 5 Nagging Insurance Queries Answered
Remember, when it comes to the amount of insurance cover you need, if you have to err, err on the side of being over-insured. Wearing a rain-sheeter and lugging along an umbrella when it’s just pitter-pattering may be a minor inconvenience at worst; on the other hand, a hanky over your head during a thunderstorm will be blown away mercilessly.