How to Adjust Your Term Insurance After Marriage or Having a Child

Life is a journey marked by incredible milestones: landing that first job, getting married, buying a home, and welcoming a child. Each step brings immense joy but also significant new financial responsibilities. A term insurance policy bought as a single person is unlikely to be sufficient when you add a dependent spouse or a child whose entire future relies on your income.
The key to sound financial planning after marriage or childbirth is ensuring your term insurance cover increases to match these new responsibilities. Thankfully, modern plans from ABSLI are designed with flexibility, allowing you to update your cover through a feature called the Life Stage Benefit or Sum Assured Enhancement. This ensures your protection evolves with your life, hassle-free.

Why Life Stages Demand a Higher Term Insurance Cover

Your insurance needs are directly linked to your Human Life Value (HLV) and the financial liabilities you carry. When your family grows, so does your HLV.
Major life events like marriage or childbirth instantly increase your financial liabilities (debts, daily expenses, future education costs) and create new dependencies, requiring you to increase your Sum Assured to prevent your family from being severely underinsured.

• New Dependency (Marriage): Your spouse is now financially dependent on you, at least partially. Your cover must protect their lifestyle, clear any joint debts, and provide them with a transition fund in your absence.
• Long-Term Liability (Childbirth): A child introduces long-term, high-inflationary costs, primarily higher education (which can easily cost ₹50 Lakh to ₹1 Crore in the future)⁽²⁾. Your cover must be able to fund this entire expense, regardless of your income status.
• Debt Acquisition: Marriage or childbirth often precedes taking a home loan. The insurance payout must cover the outstanding loan amount so your family can retain the home without financial stress.
  

According to insurance thumb rules⁽¹⁾, your term cover should be increased to at least 10 to 15 times your annual income to account for these growing family needs.

The Life Stage Benefit: The Key to Increasing Sum Assured

The most seamless way to adjust your existing policy's protection is through the Life Stage Benefit feature, provided you opted for it at the time of policy purchase.
The Life Stage Benefit is a feature in a term insurance plan that allows you to automatically increase the Sum Assured at predefined life events (like marriage or the birth of a child) without requiring a new medical examination.

How Life Stage Enhancement Works

This feature removes the biggest hurdle to increasing cover: the fresh medical underwriting.

• Pre-Approved Increase: When you buy the policy, the insurer pre-approves a "buffer" for future increases. This is typically capped at a percentage of the original cover or a maximum monetary value (e.g., up to 50% of the base Sum Assured or a maximum of ₹50 Lakh, whichever is lower).
• Milestones for Increase: The increase is only permitted following specific, documented events, which are defined in the policy document. Common milestones include:
  

○ Marriage: Often allows the largest single increase (e.g., up to 50% of base cover).
○ Birth or Legal Adoption of First Child: Usually allows an increase of 25% of base cover.
○ Birth or Legal Adoption of Second Child: Allows a further increase of 25% of base cover.

• Premium Adjustment: While no new medical test is required, the premium is adjusted for the additional cover amount. This new premium is calculated based on your age at the time of the increase and the remaining policy term, ensuring you pay a fair rate for the enhanced protection.

Critical Conditions for Availing the Benefit

To successfully increase your sum assured term plan using this option, you must:

• Notify Timely: You generally have a limited window, often defined in the policy document, from the date of the life event (marriage date, child's birth date) to notify ABSLI and apply for the increase.
• Provide Legal Proof: Submit the official legal document for the milestone (Marriage Certificate, Child's Birth Certificate).
• Age Limit: The option usually has an age restriction, typically allowed only until the policyholder reaches 45 or 50 years of age.

Beyond Cover: Updating Nominee and Payout Structure

Adjusting the Sum Assured is only half the process; you must also update who receives the funds and how they receive them.
You should formally change the nominee in term insurance to include your spouse and/or child, and consider shifting the payout method from a single lump sum to a structured monthly income to manage the funds wisely.

1. How to Change Nominee in Term Insurance

The nominee is the person legally designated to receive the death benefit.

• Procedure: You simply need to submit a Nomination Form to ABSLI, signed by you and witnessed, along with a copy of the nominee's identification proof. This is a straightforward process that does not require a medical check or premium change.
• Adding Multiple Nominees: You can designate your spouse and child as joint nominees and specify the exact percentage of the payout each one should receive.

2. Payout Structure Review

For financial planning after marriage, the lump sum option can be risky if the nominee is not financially experienced.
Consider Income Payout:
Many modern term plans offer the option to pay the benefit as a combination of a lump sum (to clear debts) and a monthly income (to cover daily living expenses). This provides a predictable safety net and prevents the sudden misuse or misinvestment of a large sum.

Conclusion

The milestones of marriage and parenthood fundamentally change your financial profile. Relying on an old, inadequate cover means failing to protect the very people you work for. By proactively using the Life Stage Benefit feature in your ABSLI term insurance, or securing a new plan if this feature wasn't included, you ensure your Sum Assured truly reflects your commitment. Take five minutes today to check your policy documents and ensure your cover grows as your family does.

Sources

⁽¹⁾https://www.business-standard.com/finance/personal-finance/explained-why-your-ideal-term-cover-should-be-10-15-times-your-annual-pay-123092101393_1.html
⁽²⁾https://www.financialexpress.com/money/insights/rs-1-crore-to-raise-one-child-the-shocking-cost-of-parenthood-in-india-today/4013190/#:~:text=Countless%20Indian%20parents%20are%20caught,want%20brands%20that%20scream%20status.