Who Should Buy Increasing Term Life Insurance? Find Out If It’s Right for You

Many people are now exploring increasing term insurance options to secure their family’s future. But the big question is, who should buy increasing term life insurance? Is it the right fit for everyone? In this article, you’ll learn what this policy offers, who can benefit from it, and answer the most commonly asked questions.

Many people are now exploring increasing term insurance options to secure their family’s...

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What is Increasing Term Life Insurance?

Increasing term insurance is a variant of term life insurance where the sum assured rises by a fixed percentage or amount each year. It is specifically designed to counteract inflation and ensure that your life cover remains adequate as your financial responsibilities grow.
Unlike standard term plans, where the cover stays constant, increasing term life insurance grows with time, offering more protection when you need it the most.

Who Should Buy Increasing Term Life Insurance?

Term insurance doesn't work the same way for everyone. Increasing term insurance is a great fit for those:

1. Young Professionals Just Starting Out

You likely have very few liabilities if you’re 20 or 30. Over the years, your situation can change with marriage, having kids, or borrowing money. Having larger coverage will keep you protected for future needs, all from one policy.

2. Growing Families

For people interested in having children or growing their families, expenses such as education, healthcare, and housing will only rise in the future. With higher terms, your policy will support and protect your family throughout every important life moment.

3. Home Loan Borrowers

If you’ve taken a long-term loan, particularly a home loan, increasing your coverage ensures that your outstanding liability is fully covered.

4. Inflation-Conscious Individuals

Inflation steadily erodes the value of money. A ₹50 lakh cover today may not be sufficient 10 years later. Those who want their policy to maintain its purchasing power over time should consider increasing term life cover.

5. Long-Term Planners

If you're someone who believes in planning for every financial scenario, an increasing term policy gives peace of mind that your family will never be underinsured.

How Does Increasing Term Insurance Work?

Here’s how increasing term plans usually work:

The base sum assured increases by a pre-defined percentage (e.g., 5% or 10%) each year.
The premium remains level in some plans or may increase periodically in others, depending on the insurer and the policy’s terms and conditions.
The increased cover kicks in automatically, without the need for fresh underwriting or medicals.
The final sum assured at the end of the policy term can be significantly higher than the initial cover.

For example, a ₹50 lakh policy with a 5% annual increment can grow significantly in about 15 years.

Advantages of Increasing Term Life Insurance

Here are some reasons why increasing term policies can be a smart financial move:

Beats Inflation: Your sum assured increases each year, helping maintain value.
No New Underwriting: You don’t need to undergo fresh medical checks for increased cover.
Better Future Coverage: Useful when your income and responsibilities are expected to grow.
Family Protection: Ensures your dependents are never under-protected, even 10-20 years from now.

Is There a Term Insurance Premium Increase Every Year?

One common concern is: Does the term insurance premium increase every year in such policies? It depends on the insurer. Most policies have level premiums, meaning you pay the same amount throughout the policy term. Always read the policy document carefully to understand how your term insurance premium increase might apply over time.

How to Increase Term Insurance Cover

In increasing term insurance, the sum assured rises automatically each year, usually by a fixed percentage. On the other hand, if you already own a regular policy and want to know how to increase term insurance cover, consider the following:

Check if your existing insurer offers rider benefits or top-up options.
Buy a supplementary increasing term plan to complement your existing cover.

Things to Consider Before Buying Increasing Term Insurance

Before signing up for increasing term life insurance, consider the following:

Affordability: Can you sustain the premiums over the long term?
Your Age & Income Growth: Are you expecting your responsibilities or income to grow?
Existing Coverage: Do you already have a basic policy? If so, do you need an upgrade or a new plan?
Policy Features: Check if the increasing benefit is optional or automatic, and whether premiums are fixed or variable

Conclusion

To decide whether increasing term life insurance is right for you, analyse what security you want for your family over the long run. This choice suits you if you want a policy with rising skills, aim for inflation protection or are just getting started to make sure you’re insured no matter what.
Added protection, assurance, and a steady increase in the sum assured make increasing term life insurance a good choice for your portfolio. Be sure to understand everything in the policy and match it to what you need at this point in your life.

FAQs on Increasing Term Life Insurance

1. Is increasing term insurance better than level term insurance?

Increasing term insurance is better suited for individuals expecting their financial obligations to rise over time. On the other hand, level term insurance is simpler and has fixed benefits.

2. Does the term insurance premium increase every year in an increasing coverage plan?

Not always. Most policies keep the premium fixed. Always verify with your insurer. Typically, the increase can be a fixed percentage, like 5% or 10% of the original sum.

3. Can I increase my term life insurance policy after a few years?

Choosing an increasing term policy means the coverage increases as time goes on.

4. Who benefits most from increasing term life insurance?

The coverage can benefit individuals starting their income-generating years, families facing increased bills, and people with big loans.

5. How can you increase term insurance coverage without buying a new policy?

If you already have a standard term plan, find out if your insurer provides riders, life-stage benefit upgrades, or flexibility to increase coverage over time. If not, you may require an extra plan for higher coverage. Alternatively, increasing term insurance automatically boosts your sum assured annually without the need to buy a new policy.

Written by Neviya Laishram

1.7K Linkedin Followers

Reviewed by Vaibhav Kumar Kaushik

A senior editor with years of expertise, she fine-tunes content that connects, converts, and builds trust. She transforms heavy life insurance concepts into clear, aha-moment reads. Writing is her passion, and thinking ahead is second nature. When not wrangling words, she’s crushing game levels because every challenge is a puzzle waiting to be solved.