Jayant Dua, MD & CEO, Birla Sun Life Insurance
Most individuals buy their first policy as a compulsive tax-saving tool or on recommendation by close relatives or friends. They rarely think about it as a financial planning tool, or factor in inflation or lifecycle changes. However, that doesn't mean that one can't rectify or modify the decision. In fact, the best time to take up the exercise is during the policy anniversary. Here is an eight-fold path that would guide you in your endeavour.
Life cycle changes
Is your marriage on the cards around the policy anniversary? Check if your would-be spouse has a life cover. If s/he is an earning member, you would have to calculate a combined human life value (HLV), the expected life-time earnings of an individual, and change the life cover accordingly.
You must also revisit the nominations. Birth of a child is another occasion when you have to think about building a corpus for the child's future. Similarly, increase in income is a good indication to consider an enhancement in your insurance cover. However, you should check if your policy provides flexibility of premium payment at a later date or have an option to stagger the premium payment if you lose a job or run into losses.
There is always a choice of enhancing one's cover or investing in policies that factor in inflation. For instance, in a term plan one can hedge against the rising cost of living with an option of increasing the sum assured. One could also add riders, if needed, to their existing policies for higher protection margin.
An individual may also invest additional amounts in regular Ulip policy premiums. Most Ulip plans offer a unique feature of top-up premiums.
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