Vikram, 36, bought a ₹75 lakh term plan when he was 28, single and earning ₹9 lakh a year in Bengaluru. It felt like plenty at the time. Eight years later, he is married with two children, has an ₹80 lakh home loan and earns ₹24 lakh a year. He hasn’t looked at his policy once since buying it. On paper, he is insured. In reality, his cover wouldn’t even clear the house.
Term insurance is often treated as a one-time decision. Your life doesn’t stay still, though, and the cover you bought years ago was sized for a very different version of you.
Why Does A Policy That Was Right Then Fall Short Now?
Two things work against an old policy. The first is that your responsibilities grow. Marriage, children, loans and supporting parents all raise the amount your family would need.
The second is inflation. At 6% a year, Vikram’s ₹75 lakh today buys roughly what ₹47 lakh would have bought when he took the policy. To match the buying power he started with, he’d need about ₹1.2 crore. The sum assured stays the same, but what it can pay for shrinks every year.
What Does Vikram’s Number Look Like Today?
Here’s a rough estimate. His household spends about ₹1 lakh a month, so 15 years of expenses come to ₹1.8 crore. Add the ₹80 lakh home loan and ₹25 lakh each for his two children’s education. Subtract ₹20 lakh of savings and investments he already has. His family would need about ₹2.9 crore.
Against that, his ₹75 lakh policy leaves a gap of about ₹2.15 crore. The estimate ignores investment returns and future inflation, so treat it as a starting point rather than a final figure. Even so, the gap is too large to explain away.
How Often Should You Sit Down And Review It?
A good habit is to review your cover every two to three years, even if nothing major has changed. It doesn’t take long. Note your current income, monthly household expenses, outstanding loans and your children’s ages, then compare what your family would need today with the cover you actually hold.
A term insurance calculator makes this quick. You can enter your current details and see where the number lands in a few minutes.
Which Life Events Should Trigger A Review Right Away?
Some changes are too big to wait two years. Getting married, having a child, taking a home loan or a large jump in salary are the most common. Starting a business, co-signing a loan for a family member, or parents becoming financially dependent on you also count. Each of these raises what your family would need, so review your cover within a few weeks of the change, not years later.
Can You Increase Cover On Your Existing Policy?
Usually not, unless your policy came with that option built in. Some term plans let you raise cover at certain life events, such as marriage or the birth of a child, often without new medical tests. If yours does, use it within the window the policy allows.
If it doesn’t, the simplest fix is a second term policy for the gap. Holding two or more policies is perfectly normal, as long as you disclose your existing cover when you apply. The new insurer will look at your total cover across both policies against your income. For Vikram, ₹2.9 crore in all is about 12 times his salary.
Found a gap in your own review? Look at term plans for the shortfall only, since your existing policy stays in place.
Mention your current policy on the proposal form, so the new insurer sees the full picture from the start.
Should You Ever Replace An Old Policy With A New One?
In most cases, no. Your older policy was priced on your age and health when you bought it, so it’s usually cheaper than a new one for the same cover.
It has another advantage. Under Section 45 of the Insurance Act, 1938, once a policy has run for three years, the insurer generally can’t call it into question on the grounds of what was in the proposal form. A new policy starts that three-year clock again. Keep the old policy running and add a new one on top.
What If Your Review Says You Need Less?
Reviews don’t only point one way. If your loans are paid off, your children are financially independent and your spouse has enough savings or income of their own, your family may need less cover than before. In that case, the sensible move is usually not to add anything.
Dropping an existing policy is a bigger decision. Term plans usually pay nothing back if you stop paying premiums, and you may not get the same price again if your needs rise later. Think it through carefully before letting one lapse.
What Else Should You Check Besides The Cover Amount?
A review is a good time to tidy up the details. Make sure the nominee is still the right person, especially after a marriage or the birth of a child. Check that your phone number, email and address are current with the insurer, and that the premium auto-debit still points to an active bank account. Look at your riders too, and ask whether you still need each one or whether something important is missing.
What Should You Do This Week?
Find your policy document, note the cover amount and the nominee, and run your current numbers. If there’s a gap, add a policy rather than replacing the one you have. Then set a reminder to repeat the exercise in two years, or sooner if your life changes. The policy that protected the 28-year-old won’t automatically protect the family you have now.
