Adjusting your term life coverage

How often should I review my life insurance cover?

There are some of the life events that should cause you to take another look at your life insurance policy to see whether it’s adequate:

  • Getting married or entering into a civil partnership
  • Getting divorced or having a civil partnership dissolved
  • Becoming a parent, whether by natural birth or adoption (every addition in the family should necessitate a review of your cover)
  • You and your spouse’s job situation. Were you promoted? Have you moved to a higher-paying job? Have you or your spouse been laid off from your work?
  • Getting a mortgage for a new house or major renovations to the existing house
  • Your child’s educational situation. Is your child keen on pursuing alternative careers that don’t require a college education? Was your child able to snag a scholarship?

Your insurance needs change over time. Life events cause your needs to increase or decrease – a marriage, the birth of a child and so on. This means that you need to adjust your life insurance cover to keep it updated with what’s actually happening to your family.

Getting Additional Life Insurance Cover

Once the policy starts, you can still apply for additional cover. You can apply for an increase in your policy coverage. Depending on the policy of your insurance company, you may need to provide additional proof of insurability such as providing the latest doctor’s reports or going for a medical exam. Also, you will be charged additional premiums for the additional cover.

Adjusting your cover to keep it updated is best done while you could. Remember, term life insurance is very affordable for those who are young and healthy. So while your premiums are quite affordable, it is good to do so.

When you are adjusting your life insurance policy, you should also take into consideration the length of your cover. If you are adding cover due to the birth of a child, you should ensure that the cover is long enough to provide life insurance protection until that child is no longer financially dependent on you.

One quick and easy way to increase your cover is to get an increasing term or index-linked term insurance policy. This allows an automatic yearly increase on the amount of over, based either on a set percentage or the retail price index for the given year. This helps to prevent inflation from eating into your cover.

Getting Another Type of Life Insurance Cover

If you are in the financial position to afford a permanent life cover or a cash value cover, this can also be a good option. One of the reasons why people go for term life insurance is that it is highly affordable when taken at an early age. However, the thing to remember is that it only provides temporary cover. If you also want to get “more” from your policy, such as an endowment (life benefits) at the end of the term, a cash value policy is the way to go. This may be expensive, but it also provides you with something to look forward to at the end of the policy term.

You can schedule this based on your life event – such as the prospect of your child going to college fifteen years from now or the vision of retiring 30 years from now. If you get your policy to coincide with these life events, you can expect to get a certain amount at the time. Of course, the shorter the period that your cash value needs to build up, the more expensive the policy may be.

To determine whether you need term life insurance or cash value life insurance, see the Term Life Insurance vs. Cash Value Insurance article.

Updated on: 05.06.2013

To secure your family's future, fill in the form on the right or call 0808 231 5178 and get your term life insurance quote now.

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*Scottish Provident 2012 life cover claims paid report.