Keeping Up With Life's Milestones: Understanding Increasing Term Insurance

While your expenses might be lower in current situations, they are expected to rise in the future as your financial obligations increase. In such cases, the increasing term plan proves relevant. Read on to find more.
Term Insurance, 
Term Insurance, Finances

Term insurance is a popular choice for its affordability and pure protection benefits. But what if your life insurance cover could adapt to your growing needs?

Increasing term insurance offers a unique solution by automatically increasing your sum assured over time.

Let's delve into what it is, how it functions, and whether it's the right fit for you.

What Is Increasing Term Insurance?

An increasing term insurance plan is a variant of regular term insurance. Here, the death benefit, also known as the sum assured, automatically increases at predetermined intervals, typically every year.

This rise can be a fixed amount or a percentage of the original sum assured. This feature helps combat inflation, ensuring your loved ones receive an adequate payout even if the cost of living rises significantly.

How Does It Work?

When you purchase an increasing term plan, you choose the initial sum assured, the policy term, and the rate or amount by which the cover will increase annually.

The premium is typically fixed for the entire policy term. This simplifies budgeting as you won't face surprises in the form of rising premiums due to inflation or age.

For example, let's say you opt for a Rs 1 crore increasing term plan with a five per cent annual increase in sum assured.

In the first year, your coverage is Rs 1 crore. In the second year, it automatically increases to Rs 1.05 crore, and so on throughout the policy term.

Should You Opt For Increasing Term Insurance?

Increasing term insurance is a good fit for individuals who anticipate their financial needs to grow over time. Here are some of the reasons to consider increasing term insurance. 

“Young investors will benefit from the rising term insurance plan. Since you begin when you are young, the insurance coverage grows in tandem with your future responsibilities,” Naval Goel, founder and CEO of said.  

Combats Inflation: Inflation erodes the purchasing power of money. An increasing term plan ensures your cover keeps pace with rising costs, offering your beneficiaries a relevant payout in the future. “We all know inflation rises year over year. As a result, having an efficient strategy against it is crucial. The additional expenses spent over the years are covered by an increasing sum assured under an increasing term insurance plan,” Goel said.

Life Stage Planning: 

As you progress through life stages like marriage, childbirth, or buying a home, your financial responsibilities increase. An increasing term plan automatically adjusts to provide the necessary cover for your evolving needs.

Long-Term Goals: If you have long-term financial goals like your child's education or retirement planning, an increasing-term plan can help bridge the gap in case of your untimely demise.

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