How to Upgrade Your Existing Term Insurance to a 1 Crore Coverage

Having adequate life insurance coverage is vital to ensure your family is financially secure in your absence. While many start with a basic term insurance plan, there often comes a stage when upgrading coverage is prudent.

As major milestones like marriage, childbirth, home loans, etc., approach, income and expenses rise. This necessitates re-evaluating insurance needs. Additionally, as one grows older, premiums increase for the same coverage. Hence, locking in higher coverage, such as ₹ 1 cr term insurance early on, helps. Upgrading term insurance policies is simple. Let’s understand how to upgrade and the key aspects to consider.

Evaluating the Need for Upgrade

The first step is honestly assessing your situation and insurance gap. Factor in household expenses, outstanding loans, children’s future needs, etc., and determine the corpus required to maintain your family’s quality of life in your absence.

Next, evaluate existing policies and calculate the shortfall. For instance, if you need ₹1 crore coverage but have a ₹50 lakh term plan, the protection gap is ₹50 lakh. Make sure to distinguish the upgrade amount from the final sum assured. You need to upgrade and enhance existing coverage to achieve the Corpus benchmark derived earlier.

A back-of-the-envelope calculation for life cover can be 10-15 times your annual income. For working professionals in metro cities, ₹1 crore term insurance is a good thumb rule.

Choosing Between New Policy and Upgrade

Once the upgrade need is confirmed, evaluate whether to purchase a new, larger policy or upgrade the existing one through the insurer. First, check for flexibility of increase, terms for incremental cover, and premium implications in the existing policy.

Usually, upgrading the current policy is more economical, as you enjoy lower premium rates as per entry age until the next renewal. Also, it saves you from undergoing fresh medical checks. However, do compare alternate quotes online before deciding. Sometimes, insurer terms for add-ons make a new, larger policy more attractive. Opt for whichever works best. But either way, use online insurance marketplaces to find deals.

Types of Term Insurance Upgrades

Broadly, two kinds of term plan upgrades exist.

Increase Coverage Amount

You can increase the sum assured (the coverage amount) on your existing term plan without changing the main features of your original policy. This means you’re increasing your coverage amount, but the core terms of your plan like the policy duration, type of coverage, or additional benefits (extras)—remain the same. This is the simplest way to boost your coverage.

You must inform the insurer and pay an additional premium proportionate to augmented coverage within specified limits. Some insurers may also ask for fresh medical certificates.

Switch Product Type

This involves upgrading from base term insurance to more advanced versions, such as converters, return of premiums, or riders. For instance, you can upgrade from a basic term plan to a convertible variant.

It allows changing the term policy to an endowment, ULIP, etc., later providing investment returns and protection. Top-up riders for critical illnesses can also be added, thereby expanding coverage.

Factors to Consider for Upgrading to a 1 Crore Coverage

While upgrading term insurance, consider the following aspects:

• Age-related Pricing: Premium rates depend on age at entry. Upgrading early is cheaper.
• Health Changes: Insurers may repeat medical tests before approving augmented covers.
• Claim Settlement Record: Analyse company claim ratio and expertise before increasing reliance.
• Financial Situation: Factor income rise, inherited wealth, etc., before upgrading covers.
• Tax Benefits: Upgraded premiums also enjoy tax deductions in Section 80C.
• Add-ons: Evaluate new riders for specific risks like disabilities or loss of jobs.

Steps for Upgrading Term Insurance

Follow these steps to upgrade term policy coverage smoothly:

1. Initiate: Write to your insurer requesting an upgrade according to eligible slabs and limits. Confirm that the existing product supports an increase or switch.
2. Fill Proposal: Next, fill out detailed proposal forms mentioning upgraded sum assured, riders, etc. Nowadays, insurers also have online proposal platforms for convenience.
3. Medical Checks: If the amount exceeds the threshold, you may need a fresh medical test. Specialist approval is required in some cases.
4. Pay Premium: Receive new quotes and premium payments on the upgraded policy.
5. Acceptance: The insurance company will finally communicate acceptance and issue an upgraded term policy.

The Bottom Line

While slightly higher premiums may apply, increasing term coverage for growing families is a valuable investment. A ₹1 crore coverage for working adults provides strong protection and peace of mind. So, systematically assess your needs, review existing policies, and leverage online tools to identify the optimal upgrade path. The key is balancing premiums and adequate protection as income and responsibilities advance. Get appropriate advice and make an informed decision.

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