Life Insurance Top-up – How to do it?


Life insurance has come a long way after it was introduced in India and today it contributes majorly to the insurance penetration in India. While it is easy to understand the need for life insurance for everyone, there are certain blockades that exist in the process.

For example, a life insurance plan once taken would continue for a very long period of time and it is not easy to alter the policy terms and conditions. The sum insured once taken would continue for the entire term of the policy and it would be difficult to enhance or decrease the sum insured during the policy period.

There could be instances where a policyholder wants to enhance the sum insured under the policy proportionate to the increase in income but the process may not be as flexible as purchasing a top up health insurance plan. At present there are no top up life insurance plans available in the market, but customers may opt to either purchase a new life insurance plan or increase the sum assured under the existing plan. 

Here are the 2 cases that are discussed for enhancing the sum assured under a life insurance policy:- 

New policy:

The most common route to increase the coverage of your life insurance is to take a new policy. Whenever your income increases, you may decide to take a new life insurance policy to match your income and liabilities.

Taking a new policy might not be feasible at all times as it comes with limitations. First, for taking a new policy, you should undergo all the required medical checkups and the entire process of underwriting should be done before the policy issuance.

Moreover, when your age increases, the risk that is to be taken by the insurance company increases and this would reflect in the policy issuance process. As your age increases, you would be required to undergo multiple medical tests prescribed by the insurer.

Despite undergoing all the required medical tests there would be no guarantee that the insurance company would offer you the sum assured you desire. A new life insurance policy might increase your overall life insurance coverage but it would not be possible to purchase a life insurance policy every time your income increases.

To tackle this issue, you might go for an increasing cover life insurance policy in which the sum assured would be increased by a certain percentage every year. This increase in sum assured is aimed to counter the inflation that would eat up the effective cover of the policy.

But it is important to note that the benefits under your original policy might no longer be available and you might therefore have to forego some of the benefits under the original policy when you buy a new one.

One of the most important points to note however is that when you are buying a new policy, you should disclose your earlier policy to the new Insurer. The new Insurer would evaluate your risk appropriately and also price it appropriately. In the absence of such declaration however

Sum assured enhancement :

The other option is to enhance the sum assured in the existing policy. Most insurance companies would permit you to enhance the sum assured under the policy but would not permit you to reduce the sum assured.

So, if you want to enhance your life insurance coverage, you may opt to enhance the sum assured in the same policy by making a formal request to the insurance company. It is important to note that the process for sum assured enhancement would be similar to that of taking a new policy except for the fact that in this process you would not have to take a new policy.

Sum assured enhancement in the same policy could be done upon the completion of all the formalities. But the catch here is that there would be a waiting period for the new sum assured under the policy. This concept is relatively new in India and is offered by a limited number of insurers.


  1. Is it advisable to take more than 1 life insurance plan?

    It would depend on your requirements to take more than one life insurance plan. You might opt to take a term life insurance plan in addition to an annuity plan and it would enhance your sum assured and serve two different requirements. You may have to revisit your life insurance cover in your middle age which might lead to multiple life insurance plans.

  2. I have an employer sponsored life insurance plan. Is it necessary to take personal life insurance?

    An employer sponsored life insurance plan would be valid only till you are with that organization. Once you decide to leave the company or they terminate you, you would be left without any life insurance cover. Moreover the life insurance cover provided by your company would not be sufficient to cover your requirements. Therefore it is advisable to take a personal life insurance plan.

  3. My company has taken keyman insurance in my name, what is it?

    Keyman insurance is a form of life insurance that is taken to cover the lives of key people employed in an organization. Keyman insurance is only provided to those individuals who contribute enormously to a company and their absence might lead to financial losses for the organization.

  4. What is the minimum and maximum sum assured in life insurance?

    The minimum sum assured in a life insurance policy could be as low as Rs.50k and there is no upper limit or the maximum sum assured under the policy. While there is no upper limit to the sum assured, the Insurer would ask you to substantiate the sum assured you opt for with your standard of living. The way insurers calculate your standard of living is by your salary. Generally speaking Insurers will not allow you a cover of more than 10 times your annual salary.

  5. How to decide the sum insured in a life insurance policy?

    The basic rule to decide the sum assured in a life insurance policy is to calculate all your liabilities as well as the future living expenses of your family in case of your absence. The sum assured could be 15-20 times of your annual income. In any case, it is advisable to make sure that the life insurance sum assured is more than your liabilities.

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Susheel Agarwal