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How to Reevaluate your Life Insurance Plan?

dateKnowledge Centre Team dateApril 22, 2021 views231 Views
How to Reevaluate your Life Insurance Plan?

Do you remember when you got your life insurance plan? A life insurance policy is not something you purchase once and forget about it. It should be periodically evaluated and reviewed to meet the needs of the future. The policy must be such that the value of benefits increases at specific periods to keep up with the inflation. Inflation protection is the desirable feature of the policy that can be added to the insurance policy. One should review their life insurance policy to keep up with the inflation. In order to that you must know how to reevaluate your life insurance plan.

How to Reevaluate your Life Insurance Policy?

There are a lot of advantages of buying life insurance plan at an early age. However, periodically reviewing the plan will help you increase your life coverage according to the risks and evolving life needs. If there's a need to reevaluate your life insurance policy, then you can make some changes in your policy by doing the following:

1. Buying More Coverage

You can buy more coverage to cover the expenses of your children through life insurance. And now you can afford more coverage than earlier. You can secure life insurance for your family by buying another policy that adds to the existing coverage.

A term life insurance plan is a good option if your needs are limited to few years. The guaranteed insurability rider lets you add coverage at certain life-changing events like having a child, etc. This rider may help you add coverage without going through a new application process.

Here are 5 reasons to add riders to your life insurance plan.

2. Change Beneficiary

The beneficiary change is mostly related to marital status. Many people prefer to keep their spouse as the beneficiary, and if you just got married or got divorced, you may need to change the beneficiary of the life insurance policy and reevaluate it according to your marital status.

However, you should avoid naming a minor or your estate as your beneficiary. The policyholder has the right to change the beneficiary at any time. The insurance company provides the procedure for doing so.

3. Change Policy

You may need a different type of life insurance policy that satisfies your current and future goals. Perhaps because the term life insurance plan expired and you feel the need to go for a permanent life insurance plan.

Insurance companies have different types of permanent life policies available. One can check the policy for details regarding the deadline for conversion, which is likely to occur before the policy expires.

4. Cash-out a Permanent Life Policy

You can surrender your permanent life policy for the cash value if you do not need it. Cashing out implies that the beneficiary will no longer avail to the life insurance claim when you die. The permanent life policy can be cashed out if you don't need life insurance coverage, or there is a good amount of cash value built up, etc.

5. Sell Life Insurance Policy

Selling your life insurance policy to a third party who buys the policy at a rate more than the cash value and less than the death benefits can be done to reevaluate your policy. The new buyer then makes the rest premium payments and eventually receives the death benefit when you die. It is advisory to contact a financial advisor before selling out your policy.

4 Reasons to Reevaluate your Life Insurance Plan

Buying an insurance policy and keeping it on track to keep up with the needs of the future goals is important. You should review your financial plans at least annually. Review your life insurance policy to align it as per your financial plan. It is evident that there are going to be changes in your plans at any point, and thus, your insurance needs are going to alter. Here are four reasons why you should reevaluate your life insurance plan-

1. Change in Income

The coverage of life insurance depends on the income you are earning and the percentage you are contributing to your life insurance policy from your income. It may happen that within a year, a person lands a great job after graduating from college or receives a promotion at the job. In contrast, maybe the person has lost the job and need to reevaluate his/her insurance policy. A change in income is a perfect opportunity to review the insurance plan.

Learn how to increase cover after buying a life insurance policy.

2. Change in Health Conditions

A change in health may be due to your healthy eating. Proper care will affect not only your health insurance rates but also the life insurance rates too. Many companies usually reward the person if there is a significant amount of increase in health by providing discounts on premiums. However, in not-so-good cases, when the health starts to decline suddenly, and the current policy may not be able to cover up for it, you should review the policy and evaluate it as per the health conditions.

3. Change in Family Status

A change in family status is the main reason why most people reevaluate their life insurance policy. The major change in family status maybe because you got married and/or you are expecting a child. Saving up for the future of your children and providing your family with a good life even after you are no longer with them is the perfect reason why you should periodically review your policy.

4. Change in Housing Status

A change in housing status means that you might have paid off your mortgage or just bought a new house. That means you either need to decrease or increase your policy coverage. Reviewing if the current housing status and insurance plan suffice the need of the future is important. You may need more or less life insurance when there's a change in housing status.

One must review their plan periodically and evaluate their life insurance policy as per their changing needs. There are times when the old insurance plan doesn't satisfy the need of the future anymore, and you may need to evaluate your policy. Adopt a few financial management hacks to stay on the right track of sorting out your personal finance. You should do a thorough analysis of your income, health, and future needs before reevaluating your plan.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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