When Should You Increase Your Term Insurance Cover?
Table of Contents
Learn when to increase your term insurance cover.7 key life events that demand higher coverage to protect your family’s financial future
You bought term insurance years ago, thinking you’d ticked off an important financial responsibility. That’s great except there’s a problem most people don’t see coming.
The term insurance cover that felt comfortable three or five years ago. It’s probably not enough anymore.
I have seen this happen countless times. Someone takes a ₹50 lakh term policy at 25, thinking it’s plenty. Fast forward to 35 they are married, have two kids, a home loan, and earning three times more. But guess what hasn’t changed. Their term insurance cover.
That’s a dangerous gap, and it happens more often than you’d think.
Your life doesn’t stand still. Your income grows. Your family expands. Your responsibilities pile up. And quietly, in the background, inflation chips away at what your money can actually buy. If your term plan hasn’t kept up with these changes, your family’s safety net has holes in it.
So when exactly should you pump up that term insurance cover. Let me walk you through this step by step, the way I’d explain it to a friend over coffee.
Why Reviewing Your Term Insurance Cover Is Crucial
Here’s something people get wrong about term insurance. they think it’s a one-and-done deal. Buy it once, forget about it, and you are sorted.
That’s not how it works.
Term insurance exists to replace your income if something happens to you. It’s there to make sure your family doesn’t struggle financially when you are not around. But here’s the thing the cover that made perfect sense when you were 28 might be laughably inadequate by the time you hit 35 or 40.
Think about what’s changed in your life over the past five years. Your salary has probably gone up. Maybe you have moved to a bigger house. Perhaps you have added a child or two to the family. Your expenses have definitely increased.
But has your term insurance cover increased. For most people, the answer is no.
And that’s a problem.
Four big reasons why you need to review your term insurance regularly:
Your lifestyle costs more than it used to. What you spend on groceries, school fees, utilities, entertainment everything costs more now than it did five years ago.
Inflation is real and relentless. That ₹1 crore cover you bought might sound like a lot, but inflation reduces its real value every single year.
You have new people depending on you. Maybe you got married. Maybe you had kids. Maybe your parents now depend on your income.
Your debts have grown. Home loans, car loans, education loans these commitments add up fast.
If even one of these applies to you, it’s time to take a hard look at your term insurance cover.
1. When Your Income Increases Significantly
Let’s talk numbers for a second.
Financial planners typically recommend a term insurance cover that’s 15 to 25 times your annual income. It’s not a perfect formula, but it’s a solid starting point.
Now, think about your own situation. If your income has jumped over the years but your insurance cover hasn’t budged, you’ve got a mismatch.
Let me give you a real example. Say you took term insurance at 28 when you were earning ₹6 lakh a year. Following the standard guideline, you got a ₹75 lakh cover. Seemed reasonable at the time.
Now you’re 35 and earning ₹15 lakh annually. By the same logic, you should have a cover somewhere between ₹2.25 crore and ₹3.75 crore. But you’re still sitting with that old ₹75 lakh policy.
See the problem?
Here’s why this matters: when your income goes up, your family’s lifestyle and expenses go up with it. They become more dependent on that higher income. If something happens to you, that ₹75 lakh isn’t going to maintain their current lifestyle for very long.
Your term insurance should grow as your income grows. Simple as that.
2. After Marriage
Marriage changes everything financially, even if you don’t realize it immediately.
A lot of young professionals buy a basic term plan when they’re single—maybe ₹50 lakh or ₹1 crore. It feels sufficient because, well, they’re only looking after themselves.
Then they get married.
Suddenly, there’s another person whose financial security depends on you. Even if your spouse is working and earning well, marriage creates joint financial goals and shared responsibilities.
Think about it: if something were to happen to you, could your spouse maintain the same lifestyle on a single income? Could they handle the rent or EMI alone? What about the savings goals you’ve been working towards together?
And here’s something people don’t always consider: many spouses take career breaks for various reasons—childcare, elderly parents, health issues, further studies. If that happens, your income becomes even more critical.
Marriage is a clear signal to review your term insurance. If you bought your policy as a bachelor or bachelorette, that cover is almost certainly not enough anymore.
3. When You Become a Parent
This is huge. Having a child is probably the single biggest reason to increase your term insurance cover.
I’m not being dramatic—the financial responsibility of raising a child in India today is staggering.
Think about what you need to provide for:
Quality education from kindergarten through college (and maybe postgraduate studies)
Day-to-day living expenses for at least 18 to 20 years
Healthcare, extracurriculars, hobbies
Eventually, perhaps, a wedding or help with higher education abroad
And here’s the kicker: education inflation in India runs at about 8 to 10 percent every year. What costs ₹5 lakh for a degree today could easily cost ₹15 lakh fifteen years from now.
If your term insurance doesn’t account for these escalating costs, your child could end up severely underfunded if something happens to you.
Plus, there’s your spouse to think about. If you’re not around, they’ll be raising your child alone while potentially also managing a job. Your term insurance needs to give them breathing room—not add financial stress on top of emotional loss.
Bottom line: if you’ve become a parent and haven’t looked at your term insurance since, you’re likely underinsured. Fix that now.
4. When You Take on Large Loans
Home loans, business loans, car loans—these are massive financial commitments, and they don’t disappear if something happens to you.
Here’s the uncomfortable truth: if you’re not around, your family inherits your debts along with your assets.
Imagine this scenario. You’ve taken a ₹50 lakh home loan. You’re making steady EMI payments. Life is good. But if something unexpected happens, your spouse is suddenly stuck with that loan.
Can they afford the EMIs on their own? Will they have to sell the house? Downgrade to a smaller place? Dip into savings meant for your child’s education?
That’s not the legacy you want to leave.
Your term insurance should be high enough to cover your outstanding loans plus regular living expenses for your family. A new loan—especially a big one like a home loan—is a critical trigger to review and increase your term insurance cover.
Don’t leave your family with debt and inadequate insurance. That’s a recipe for financial disaster.
5. When Your Lifestyle Improves
Let’s be honest: as your income grows, your lifestyle tends to improve too.
You move from a 2BHK to a 3BHK. You put your kids in better schools. You take nicer vacations. You eat out more often. You upgrade your car.
None of this is wrong—you’ve worked hard, and you deserve to enjoy the fruits of your labor.
But here’s what you need to remember: your family will want to maintain this improved lifestyle even if you’re not around. They shouldn’t have to drastically downgrade their quality of life because your term insurance cover is stuck at levels from five years ago.
If your lifestyle has leveled up significantly, your term insurance needs to level up too. It’s that simple.
6. When Inflation Has Eroded Your Existing Cover
Let me ask you something: do you think ₹1 crore today will have the same purchasing power 15 years from now?
Of course not.
With inflation averaging around 5 to 6 percent in India, the real value of your term insurance cover shrinks every year. It’s like watching ice melt in the sun—slow but steady.
I’ve met people who bought term plans 8 or 10 years ago and feel confident because the number looks big. “I have ₹1 crore coverage,” they say proudly.
But when you adjust for inflation, that ₹1 crore from 10 years ago is worth maybe ₹60-65 lakh in today’s money. Suddenly it doesn’t seem so impressive, does it?
This is why reviewing your term insurance regularly isn’t optional—it’s essential. Inflation is silent, but its impact on your family’s financial security is very real.
7. When You're Still Young and Healthy
Here’s advice that might seem odd at first: the best time to increase your term insurance cover is when you don’t desperately need it yet.
Why? Three reasons:
Premiums are cheaper when you’re younger. A 30-year-old pays significantly less than a 40-year-old for the same coverage.
Health complications haven’t developed yet. The older you get, the more likely you are to have health issues that make insurance more expensive or harder to obtain.
Medical underwriting is easier. Fewer medical tests, less scrutiny, faster approvals.
Waiting until you absolutely need higher coverage often means paying much more for it—or worse, being denied altogether.
Should You Increase the Existing Policy or Buy a New One?
Good question. In most cases, buying a fresh term insurance policy is smarter than trying to increase your existing one.
Here’s why:
Your old policy stays intact with its low premium (you locked in a good rate when you were younger)
The new policy reflects your current income and needs accurately
It’s easier to track multiple policies than one complicated one
You can add specific riders on the new policy based on what you need now
And don’t worry—having multiple term plans is completely normal and often recommended by financial advisors. There’s no rule saying you can only have one.
How Much Should You Increase Your Term Insurance By?
There’s no magic number that works for everyone, but here’s a practical framework:
Calculate your current annual income and multiply by 15 to 25
Add all your outstanding loans
Factor in future goals—children’s education, spouse’s retirement needs, wedding expenses
Subtract existing savings and investments that your family can access
The result gives you a rough idea of how much total coverage you need. Compare that to what you currently have, and you’ll see the gap.
If math isn’t your thing or the situation feels complicated, talk to a qualified financial advisor. A detailed needs analysis takes about an hour and can save your family from financial hardship down the road.
Final Thoughts: Don't Let Outdated Coverage Put Your Family at Risk
Look, term insurance isn’t sexy. It’s not fun to think about. Nobody wants to imagine the worst-case scenario.
But here’s the reality: term insurance is one of the most important financial decisions you’ll ever make. It’s not about you—it’s about the people you love and want to protect.
If your life has changed but your term insurance hasn’t kept pace, you’re giving yourself false security. You think you’re covered, but you’re not—at least not adequately.
Reviewing and increasing your term insurance at the right time isn’t paranoid or pessimistic. It’s responsible. It’s loving. It’s making sure your family’s future stays financially stable no matter what life throws at them.
The question isn’t “Do I have term insurance?”
The real question is: “Is my term insurance actually enough for my current life?”
If you hesitated even for a second just now, you know what you need to do.
FAQs
When is the right time to increase my term insurance cover?
You should consider increasing your term insurance cover whenever there is a major change in your life—such as a salary hike, marriage, birth of a child, or taking a home loan. These events increase your family’s financial dependence on your income, making higher coverage necessary.
How often should I review my term insurance coverage?
Can I increase my term insurance cover after buying a policy?
Is it better to buy a new term plan or modify the existing one?
How much term insurance cover do I need after a salary increase?
Disclaimer
The information provided above is for general awareness only and should not be considered as insurance advice. Policy benefits, features, and exclusions may vary between insurers. Please read the policy documents carefully or consult a licensed insurance advisor before purchasing or renewing an insurance policy.