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There are times when an individual realises that the insurance cover she has taken is inadequate as there have been several changes in her life. This could lead to a position where she is actually underinsured even though she has the necessary insurance policy.
This is the time when she has to carefully look at the conditions that have changed to see whether an additional insurance cover needs to be taken. Here is a look at some of the scenarios when this would arise and the ways and means to tackle the same.
Higher earnings:
One of the first conditions that can trigger a need for a higher amount of insurance is higher earnings. The amount that is actually going to support the dependents in the family in the lifestyle to which they are now getting accustomed should determine the extent of the insurance cover. It could be that earlier when the insurance policy was taken, the earnings were low and hence a proportionate amount of insurance was taken to meet the needs of the time. Now with the earnings having increased, there is a need to revisit the entire situation. A higher cover would be able to meet any situation that arises.
Birth in family:
There could also be a situation where the family of the individual has expanded due to the birth of a child. This would have been after the initial policy has been taken, so suddenly the individual is faced with a situation where they have a specific cover but this is calculated on the basis of the requirement for just the family members that were present earlier and this leaves out the required cover for the new member. If this is the case, then there would have to be a reworking of the entire position and the individual would have to see what is the extra cover that needs to be taken that would satisfy the position of having protection for the additional family member.
Increase in dependents:
It could also be that the number of dependents for the individual has gone up. When this is the case, it would result in a situation where the need for the additional cover would be very high. This could happen due to parents’ retirement or it could be that some other family member has become a dependent due to specific circumstances that face the family. If this is the case, then the individual would have to ensure that she first looks up his insurance policy to see the extent of the cover and then see how to enhance it to meet the needs of the changing environment.
Higher responsibility:
There are any number of circumstances in which the individual would end up with a higher responsibility in terms of financial commitments, even though other conditions remain the same. If the risk for the family is higher, this would have to be cushioned with a higher amount of insurance cover that would ensure that the family does not worry about the future and feels protected. Higher responsibility can be a positive thing and all that the individual has to do is to ensure that this burden is shared effectively and it does not become a big cause for concern on the financial front.
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