What is Increasing Term Insurance?

Term insurance plans are one of the tools of financial security. These plans help you secure your family’s financial needs in the face of unexpected contingencies. Moreover, there are different varieties of term insurance policies available in the market. One such policy is the increasing term plan. Let’s understand what the plan is all about. An increasing term insurance policy is a term plan wherein the sum assured increases annually. This increase is either allowed as a percentage of the original sum assured or as a fixed amount. The increase may be allowed up to a specified maximum limit, depending upon the insurer and might continue during the policy tenure or up to the term up to which the sum assured has increased to the maximum limit. If the insured dies during the policy tenure, the sum assured available in the year of death is paid to the nominee. However, increasing term plans usually don’t pay any maturity benefit.

Important aspects of the increasing term plan

Here’s a look at some of the important aspects of the increasing term plan –

👉🏻 Premium

The premium of an increasing term plan remains constant over the policy tenure. Though the sum assured increases every year, the premium doesn’t.

👉🏻 Coverage

Increasing term insurance policies allow comprehensive coverage. As the coverage level increases, you can enjoy higher protection in the later years of your life when your financial responsibilities might increase.

👉🏻Riders

Increasing term insurance policies also allow multiple riders to choose from. These riders are available at additional nominal premiums and help you enhance the coverage of the policy.

Advantages of Increasing Term Insurance Plan

Here are some advantages that make an increasing term plan useful –

👉🏻Helps as a backup where Financial expenses are increasing

While your expenses might be lower in current situations, they are expected to rise in future as your financial obligations increase. In such cases, the increasing term plan proves relevant. It accounts for the increasing financial expenses of your household and pays a higher sum assured in the case of an unfortunate premature death during the policy term. This allows your family to tackle the increased expenses in your absence.

👉🏻Effective against inflation

The increasing term plan may prove effective against inflation which drives up the cost of your financial goals. For instance, if higher education for your child might cost Rs.20 lakhs in current times, it may rise considerably a decade or two later. Thus, when you have an increasing term plan, you may be able to create a sizeable backup corpus against the inflated costs

👉🏻Affordable

Though an increasing term plan offers higher levels of coverage, the premiums might be affordable. Being a protection-oriented plan, the affordable premiums can help you opt for suitable coverage. There’s also an option to choose your premium payment mode. You can pay a lump sum premium at once and pay for a limited tenure or over the entire policy tenure. You can also break down the premium into half-yearly, quarterly or monthly modes to make it more afford

How to buy an increasing term insurance policy?

An increasing-term insurance policy is available online as well as offline. Here’s how you can buy the policy –

👉🏻 Offline

You can visit the branch of the insurance company or contact an insurance agent. Fill up a physical proposal form and submit it with your relevant documents. The insurance company will underwrite the proposal and issue the plan.

👉🏻 Online

You can visit the insurer’s official website or an insurance marketplace to buy increasing term insurance online. Fill up the online application form and pay the premium online. The insurer would assess your proposal and process the policy issuance accordingly.

Benefits of Buying an Increasing Term Insurance Plan
There are various benefits of an increasing term plan. Let us know more about each one of them in detail.

👉🏻Beats Inflation
The increasing cover will help you fight the inflation. The sum assured amount that is effective today may not be adequate tomorrow. To beat the inflation, you will need an increased sum assured for the future. This plan gives you the chance to fight against inflation.

👉🏻Meets Changing Financial Goals
The cover will help to meet your ever-evolving financial goals. Your financial needs may change as you grow in life. For example, the term insurance cover that was sufficient for you when you were single will never be enough when you get married.

👉🏻Affordable
The premiums of an increasing term insurance are low and affordable. It depends on your life insurer if the premium of your term plan will increase or remain same. Check the terms and conditions of the plan before you decide on something.

👉🏻Helps Save Tax
An increasing term insurance plan helps in saving tax under Section 80C of the Income Tax Act. The death benefit received by the nominees of the plan is also tax free.

👉🏻No Additional Underwriting
As the base sum assured can be increased in the same term plan, you do not have to go through underwriting process again. However, if you apply for a new term plan, you will have to go through the same process