What is an Increasing Term Insurance Plan?
Published On Sep 01, 2021
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The fundamental motivation for people to purchase term insurance is to give financial stability to their loved ones in the event of their death. It enables your family to achieve their life goals regardless of unanticipated circumstances. As you get older, your financial goals tend to shift. With increased comfortable living and medical bills, your financial needs may expand. Hence, you may not be able to protect yourself against these shifting dynamics with fixed-term insurance. This is where an increasing term insurance policy might help.
What is an Increasing Term Insurance Plan?
An annual increase in the sum assured is guaranteed with an increasing term insurance plan. After adjusting for inflation and your financial goals at the time, the increment is fixed. With an increasing term insurance plan, the policyholder can increase the sum assured amount at any time during the policy term. In addition, depending on your insurer, the policy rates may or may not change. Ideally, increasing term insurance plans are helpful when achieving financial goals for you and your family at various periods of life. For example, this plan allows you to increase the amount of term insurance coverage after significant life events such as marriage, the birth of a child, etc.
What are the Advantages of an Increasing Term Insurance Plan?
The following are some of the advantages of an increasing term insurance plan.
- Combate Inflation - As we all know, inflation rises year after year; thus, it is important to have an appropriate insurance strategy against it. The additional expenses incurred over the years are covered by the increasing sum assured with an increasing term insurance plan. In this way, even if you are not present, your family will be adequately safeguarded in the future.
- Fulfil Financial Goals at Different Stages of Life - The increasing life cover will fit with your life goals regardless of when you purchase the increasing term insurance plan.
- Affordable - The cheapest life insurance product on the market is an increasing term insurance plan. Most insurers charge the same premium throughout the policy term, so you won't have to worry about running out of money.
- Tax Benefits - An increasing term life plan allows you to deduct premiums paid under Section 80C of the Income Tax Act like any other term insurance plan. Furthermore, your beneficiaries will receive a tax-free death benefit. These tax advantages for term insurance help policyholders save money in the long run.
Must read: Top Term Insurance Policies in India
How is an Increasing Term Insurance Plan Different From Other Term Plans?
The difference is in the death benefit, which is the cash payment made to your beneficiary when you pass away. Unlike increasing term plans, which increase the payment with time, level term insurance has the same death benefits and premiums throughout the policy's life. Another alternative is decreasing term life insurance, which pays out less over the course of the policy's life. Decreasing term rates are often lower than other types of term insurance, and they might be an excellent method to assist your family cover a mortgage or other obligation that is gradually decreasing in value.
Is an Increasing Term Insurance Plan A Good Option For You?
If you want your coverage to stay up with predicted improvements in your income or expenses, an increasing term plan can be a good choice. Increasing term plan also safeguards your financial investment for the future, which is always a concern for long-term coverage. However, since increasing term plan is more expensive than other types of term life insurance, it might not be worth it if you don't expect your needs to change over time. A life insurance advisor can help you sort through your options and discover the best policy for you.
Term insurance plans are popular because of the death benefit they provide, but they also provide a lot more. Rider benefits can be added to term policies to increase the policy's coverage. Return of premium cover, critical illness cover, waiver of premium cover, accidental death insurance, and other riders are available.
Also read: Online Term Insurance For Senior Citizens
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.