Secure Your Future with Life Stage Benefit in Term Insurance

In the previous article on term insurance coverage, we have learned how with time, our financial responsibilities grow, along with the cost of living. The sum assured that seemed adequate at the time of purchasing the life insurance policy may not be enough 10-15 years later. Hence, it is crucial to review your term insurance coverage periodically to ensure it keeps up with your changing needs. However, manually upgrading term insurance coverage by buying a new policy to keep up with changing requirements may not be convenient for everyone. This is where Life Stage Benefit Option in term insurance comes to help.

The Life Stage Benefit is based on the idea that a single coverage amount cannot be sufficient for all your life stages. With this option, your life insurance policy can be more adaptable to meet your evolving needs. This unique term insurance benefit enables your coverage to be modified to align with your life objectives by raising the sum assured at crucial points based on the policy's features.

What Is Life Stage Benefit Option in Term Insurance?

The Life Stage Benefit in term life insurance acknowledges that a single coverage amount is not suitable for all individuals at different life stages. This means that the sum assured that was adequate when you initially purchased the policy may not suffice at a later stage in life. The life stage benefit adds flexibility to your term life insurance plan, ensuring that it can accommodate your growing needs. This feature is beneficial for individuals who understand the importance of life insurance, and having it in your policy means you do not have to pay a high premium at the time of policy purchase to enjoy this benefit.

Why Does Your Life Insurance Coverage Need to Change at Every Stage in Life?

If you are in your early 20s, as a young adult, you are likely single with limited responsibilities, as you are either studying or starting your career. You may have few liabilities or assets to manage and may not have any dependents besides student loans to repay.

As you approach your late 20s or early 30s, you may have established careers and stable salaries, and taken on financial responsibilities such as buying a car or a house, resulting in outstanding loans. Marriage is also common during this stage, making life insurance plans necessary to protect against unforeseen circumstances.

In your late 30s and early 40s, your priorities shift to looking after your family, including your spouse, ageing parents, and children. At this stage, you must have comprehensive insurance coverage that covers life, disabilities, and critical illnesses as children's education expenses and parents' healthcare needs increase. The coverage should be adequate to cover significant expenses such as higher education and weddings while providing income in your absence.

Elderly couples, typically above 50-55, plan for their retirement or are already retired. They may face more significant expenses such as medical needs, children's higher education, weddings, etc. While you may have saved enough for retirement, you may want to leave a financial legacy for your children or grandchildren.

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What Are the Benefits of the Life Stage Benefit Option in Term Insurance?

1. The premium remains the same:

An important advantage of a Life Stage Benefit Option in term insurance is that there is no need for medical tests when you increase your insurance coverage. So, the changes in your health condition will not result in a premium increase.

2. No changes in underwriting:

The underwriting for the increased coverage will remain the same as the base term plan.

3. Minimum documentation:

Apart from proof of life stage, such as a marriage certificate or birth certificate of a child, no further documentation is required.

4. Easy to manage:

This option enables you to upgrade your current policy, so you only have to manage one policy. Moreover, your family will only have to go through a single claims process.

5. Offers convenience:

Acquiring a Life Stage Benefit is straightforward. You simply need to select the appropriate option and wait until the life stage arrives to increase the sum assured.

What are the things you should be aware of when opting for a Life Stage Benefit Option in Term Insurance?

1. Take note that some insurers may have a cap on the maximum increase of sum assured for each life stage. Hence, it is advisable to be aware of such limits in advance to avoid any surprises during the upgrade process.

2. Insurance providers do not charge an additional premium for adding the Life Stage Benefit Option when you buy the policy. However, when you decide to upgrade the sum assured, your premium may increase based on your age, sum assured, and other relevant factors.

3. The Life Stage Benefit feature has an age limit and is usually offered only to individuals below a certain age, which can vary depending on the insurance company but is typically around 45 to 50 years.

4. Individuals with pre-existing chronic diseases cannot take advantage of this option as the insurance providers offer the Life Stage Benefit Option only to individuals with Standard Lives.

5. Some insurers have a waiting period condition. So, you can increase your coverage or upgrade the plan only after you survive the waiting period.

To conclude:

While most of us are aware of the importance of increasing our term insurance coverage with different life stages, not many take the effort to increase the coverage by contacting the insurance provider or buying another term insurance policy. The Life Stage Benefit Option is a great way to stay up to date with your changing insurance requirements, as it allows you to upgrade your policy with an easy and convenient process and minimum documentation. However, take note that there could be several terms and conditions to increase your coverage with a Life Stage Benefit Option. Hence, before opting for a Life Stage Benefit Option, it is advisable to read and understand the policy document carefully.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.