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Increasing Term Insurance Plan

An increasing term insurance is a type of term life insurance in which the sum assured increases every year at a fixed rate. These plans offer the sum assured to the nominees in the event of the policyholder’s unfortunate death during the policy term. With these plans, you can ensure that your term life cover is enough to cover your increasing financial needs.

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What is an Increasing Term Insurance Plan?

Under these term insurance plans, the coverage amount chosen by the insured at the commencement of the policy increases every year at a specific amount. However, the premium rate of the policy might or might not be the same throughout the tenure of the policy. In term insurance with increasing cover, the sum assured allowed under the policy depends on the health of the policyholder at the time of purchasing the policy. These plans are specifically designed keeping in mind the changing needs of a person and take care of the rising inflation. 

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How Does an Increasing Term Insurance Work?

Let us understand how term insurance with increasing cover works with the help of an example:

Suppose Suman bought a term insurance with increasing cover online for a policy term of 15 years, and sum assured increasing at 5% each year. If the base sum assured was 50 Lacs, and Suman suffered an untimely death in the 4th policy year, her dependants would receive an amount of Rs. 55,12,500 on Suman’s death.

Note: You can use a term insurance premium calculator to check the premiums payable for your desired life cover.

What are the Features of Increasing Term Insurance?

Along with the benefit of providing higher coverage to the family of the insured, there are many other features of term insurance with increasing cover which include the following.

  1. Premiums

    The premiums for increasing term insurance may increase or remain the same as per the T&Cs of different insurers. You should always read the policy documents to get a better understanding of your premium payment structure. You can choose to pay the premiums in annual, monthly, quarterly, or semi-annual mode for the suitable premium payment term as well. 

  2. Coverage

    In some of the increasing term insurance policies, there is a certain limit to the maximum raise of the sum assured amount. Once the sum assured amount reaches the maximum limit, it remains constant for the rest of the policy tenure. The rate by which the sum assured will increase is pre-defined and remains the same for the entire policy term.

  3. Benefits

    In case of the demise of the life assured person the policy tenure, a death benefit equal to the sum assured amount is paid to the nominee of the policy. Some increasing term insurance plans also offer different payout options. Under these payout options, you can choose if you want the payout to be made in monthly, increasing monthly, or lump sum + monthly installments.

  4. Riders

    Riders are add-on benefits that people add to their policy to enhance their base coverage. The most common term insurance riders are critical illnesses, terminal illnesses, accidental death riders, accidental total permanent disability riders, and waiver of premium riders.

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What are the Advantages of Increasing Term Insurance Plans in India?

Let’s take a look at some of the benefits of buying an increasing sum assured term plan:

  1. Affordable

    The main benefit of buying an increasing term insurance policy is that it offers a low premium rate since it is one of the most affordable type of life insurance. Moreover, the premium of the policy may remain constant throughout the policy tenure or may increase at a fixed rate as per the insurer’s T&C.

  2. Helps to Beat Inflation

    The coverage amount you purchase for your family now might not be enough to take care of the liabilities in the future in your absence. As the sum assured amount in this term plan increases every year, it helps you to deal with the rising inflation and provides you with the right coverage to ensure the financial security of your loved ones.

  3. Tax Saving

    Along with the benefit of providing financial security to your loved ones, the increasing term insurance policy also provides the advantage of tax saving. The premium paid towards the policy up to the maximum limit of Rs.1.5 lakh is eligible for tax exemption U/S 80C of the Income Tax Act.

  4. Helps to Fulfill the Increased Financial Requirement

    With the increase in age, the financial responsibility of an individual also increases with time. As you grow old and get married, you have to plan for your kid’s financial future, pay off loans, create a retirement fund, accumulate wealth for the future, etc. With an increase in financial needs, the sum assured of the policy should also increase. The increasing term insurance plan helps you to fulfill the financial responsibility of your family even in your absence and help them to maintain a good lifestyle.

Wrapping it Up!

An increasing term insurance policy is best suitable for individuals who are young and expect their responsibilities to increase in the future. However, before making an informed decision make sure that you compare term plans and choose the plan which best suits your requirement.

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