What is an Increasing Term Plan

Life insurances come as the best investment for people to secure a good amount of cash for their beloved ones after the insured person is gone. life insurance plans s ensure that the insured can plan for the well-being of your loved ones and give them a secure future even after the insured’s death.Term insurance plans are among the best policies that fall under life insurance dealing with the death benefit. While buying a term insurance plan, you should always have a coverage amount that will help meet your future goals. But with the change in income, age, and rising expenses, some of our financial goals also need adjustment. What about your insurance policy? Does the policy should also be adjusted as per the changing dynamics? The answer is ‘Yes.’ In such a case, you should opt for an increasing term insurance plan. Let’s get to know more about it in detail.

Under this plan, your sum assured increased by a certain level, depending on the inflation or your financial goals. The premium also increases if the insurance cover is raised or it may remain stagnant. The insurer allows you to hike the sum assured as you complete a milestone or a life stage. Suppose you have term insurance, and once you get married or plan to start a family, you can increase the insurance cover by a certain percentage that will help meet your expenses.

Now that you have an idea about an increasing term insurance policy and how it gets adjusted to your life stages. Let’s get to know how the policy works with the help of an example.Example:

• Rohan is a 30-year-old man who purchases an increasing term insurance policy with a sum assured of Rs.30 lakh.
• He opts for this policy so that his dependent family members do not have to face any financial trouble if he expires.
• Using an online term insurance premium calculator, he estimates how much insurance cover he should opt for and how much premium he can afford to pay.
• Based on the calculations, he decides to increase his sum assured by 5% every year. So, if he has purchased the policy of Rs.30 lakhs cover on 22 January 2020. The next year, his sum assured will increase by 5%, which is Rs. 31.5 lakhs on 22 January 2021. It keeps increasing until the sum assured doubles, which is Rs 60 lakhs, provided the tenure is too long. This is how the policy works.

• Change in premium rate Some insurers increase the premium rate along with the sum assured amount, while others prefer to charge the same premium rate for increasing term insurance. This type of policy usually has a high premium as against the regular term insurance plan.
• Increase in coverage While you pick this policy type, you need to know that the rate of increase in sum assured amount is decided between the policyholder and the insurance company at the beginning of the policy. Additionally, the amount will not increase once the sum assured doubles during the policy term. If you choose an increasing term insurance cover of Rs.20 lakhs, then the sum assured cannot increase beyond Rs.40 lakhs, it will stop at that.
• Riders Like the regular term insurance plan, you can choose riders to enhance your policy scope. Some of the most preferred riders insured people opt for include an accidental death benefit, critical illness cover, waiver of premium rider, and disability cover.

Having an increasing term insurance policy has its own benefits; these include:

• Keeps your life goals intact Financial planning should be a priority to achieve your life goals. Hence, you need to have an insurance cover that adjusts to rising inflation, life goals, and milestones. In such a case, an increasing term insurance policy can be a boon.
• Matches inflation You don’t have to worry about the rising expenses if you have chosen an increasing term insurance plan. The policy considers the inflation factor; thus, you’re saved from the worry of the cost of living if you fail to get returns on investments.
• Aligns with goals based on life stages As mentioned earlier, the policy cover increases based on your life milestones – whether you’re getting married or having a child. You can also change the premium payment frequency as per your convenience.

Whether you’re a salaried person, businessman, or self-employed, you can use increasing term insurance policy. The policy provides financial security by aligning with your life goals, and most importantly, it beats inflation. The policy has innumerable advantages, and it perfectly adjusts to your life goals.

You can buy an increasing term insurance policy online. The minimum age to buy the policy is 18 years, and the maximum age is 60 years. Note that the surrender and maturity benefit depends on the terms and conditions of the insurer.The insurance policy is indeed attractive, but thorough research is advised before actually investing in the policy.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.