A detailed guide on Increasing Term Insurance Plan

While buying a term insurance policy, paying attention to the sum assured is necessary. Since the coverage value determines your family’s financial safety during your absence, it is essential to opt for the correct sum assured. Furthermore, life throws multiple responsibilities during different stages of life, and handling them with ease requires some sound financial planning. Therefore, an increasing term insurance plan is designed so that you can automatically manage the growing responsibilities of life and create a decent financial corpus for your family to use in the future.

What is an increasing term insurance plan?

Ranjit Kumar has just joined his dream company as a business analyst. He wanted to put his first month’s salary to good use and not splurge it on unwanted expenses. With this mindset, he met with a financial advisor who suggested an increasing term insurance plan as his first investment considering his young age. So Ranjit immediately bought a term insurance plan for a sum assured of Rs 50 lakhs with increasing cover at essential life milestones such as marriage, childbirth, etc.

Since he was living with his parents and supporting them financially, he was assured the term plan would take care of his parents’ financial needs in case of any unfortunate event that might happen to him. He was also confident that the same term insurance policy would increase its coverage value by 50% after marriage, enabling him to safeguard his partner. By opting for an increasing term insurance plan, Ranjit has ensured his insurance needs are met for the entire lifetime.

The increasing term plan accounts for the extra expenses you may incur while moving to the next stage by increasing the coverage by 25% or 50% without the need to buy additional policies. 

Therefore, let us take a deeper look at these policies by analyzing their features concerning your family’s financial stability.

Sum Assured: The coverage value or sum assured, as mentioned earlier, increases at specific intervals in an increasing term plan insurance policy. The extent of this increase depends on each plan as some insurers offer a particular rise in percentile during critical life stages, such as:

• 50% increase in sum assured at Marriage
• 25% increase in sum assured at 1st childbirth

Some plans offer a 5 or 10% increase in the sum assured every year until it reaches 100% or 200% of the original sum assured.

Since the coverage amount is payable to the nominee, if anything untoward happens to the policyholder, an increasing sum assured is an advantage.

Premiums: Though the coverage value increases in an increasing term insurance plan, the premium stays consistent throughout the policy tenure. A term plan premium increases when you go for a top-up of the coverage. Still, in an increasing term insurance plan, the insurer fixes a higher premium expecting the increase in sum assured in the future. Therefore, the premium of these plans is usually a little higher than the regular term plan.

Partner Coverage: Adding your spouse to an existing term plan has many benefits in terms of cost and filing claims. Instead of opting for a separate policy for your partner after marriage, you can attach your partner to an increasing term plan since the coverage value gets increased at a critical life stage. Some plans also provide a provision for the insurance coverage to continue for the spouse even after the demise of the primary insured, with the future premiums, completely waived off.

Riders: These are add-ons that you may add to their existing insurance policies for an extra cost to make it more comprehensive to address particular specific needs for the policyholder. Here are some of the popular riders that are available with term plans:  

• Critical illness benefit rider: On diagnosis of any of the listed critical illnesses, the critical illness benefit is paid to the policyholder by the insurer
• Accidental death benefit rider: In the event of death of the insured due to accident, the death benefit sum assured, in addition to the base sum assured, is paid to the nominee.
• Accidental disability benefit rider: In case of disability of the policyholder due to accidents, the accidental disability benefit is paid.
• Serious illness cover rider: The policyholder is paid with the serious illness benefit that covers treatment and post-recovery costs if diagnosed with any serious illnesses.

Benefit Payouts: The prime reason behind buying term plans is the facility to choose the type of benefit payout that shall be released if the policyholder passes away during the policy term. The increasing term plan functions in the same way as that of a regular term plan. It offers these payout types: full lump sum payout, lump-sum + regular monthly income, lump sum + increasing monthly income, lump sum + regular monthly income.

Advantages of Increasing term life insurance

In addition to the extra layer of protection, an increasing term life insurance has many practical benefits compared to the regular term plan. They are listed below:

• Handles rising expenses: The cost of products and services is increasing every year due to rising inflation. To manage these expenditures, one has to shell out extra, but with an increasing term plan by your side, the expenses are covered adequately over the years. In addition, if you are starting a family or expecting a baby, or buying a new house or property, the increasing cover automatically aids in factoring in the new charges that come along with the new lifestyle.
• Fits your pocket: Even though the coverage value increases periodically, the premium remains the same throughout the policy term, making it an affordable option for those looking to buy a term plan that covers all their dependents and is easy on the pocket. the normal limits mainly because of the
• No additional medical tests: By choosing to buy an increasing term insurance policy, there is no requirement to undergo multiple medical tests even though you are applying to increase the life coverage during important life stages.

Overall, the choice of a term insurance plan depends on a person’s requirement. If you want to cope with rising inflation, an increasing term insurance plan is ideal. This form of term plan also helps with additional sum assured during important milestones in life. You can visit iiflinsurance.com to know more about the features and benefits of increasing term plans.