Features of Increasing Term Life Insurance

Life doesn’t stay the same; it keeps moving forward. With growing income and increasing expenditure over time, having a life cover that also increases with time can make a huge difference, which is where increasing term life insurance comes in. In this guide, you’ll learn about the key features of increasing term life insurance and how it works. Whether you're looking to buy a policy for the first time or looking to upgrade your coverage, this guide will help you make an informed decision.

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What is Increasing Term Life Insurance?

Increasing term insurance is a term life insurance variant in which the sum assured increases annually by a predetermined percentage. In India, most plans follow a fixed annual increment, like 5%, 10%, etc, on the original sum assured, depending on the insurer’s terms. This ensures that the life cover grows over time to keep pace with inflation and rising living costs.

Unlike level term insurance, which has a fixed sum assured amount for the policy term, increasing term life insurance is designed to provide a consistent and systematic increase in life cover to address future financial obligations.

What are the Features of Increasing Term Insurance

Here are the major components of increasing term life insurance that make it popular among financial planners:

1. Annual Increase in Sum Assured

A critical aspect of term insurance is the annual increase in the sum assured, which is typically 5%, 10%, etc., as per the insurer’s terms and conditions. This mitigates the adverse consequences of inflation over time.

2. Premiums May Be Fixed or Vary Based on the Insurer's Structure

Depending on the insurer’s product design, the premiums for increasing term insurance are typically fixed throughout the policy term, even as the sum assured increases annually. However, some insurers may offer variants where premiums also rise over time (less common). It's important to review the policy information in order to gain insight into your premium structure. You can choose to pay premiums yearly, half-yearly, quarterly, or monthly, depending on your preference and the options provided by the insurer.

3. Customisation Options

Increasing term life insurance policies often offer the option to be customised with additional riders such as:

Accidental death benefit
Critical illness cover
Waiver of premium
Income benefit rider

These riders provide additional financial protection beyond the basic death benefit.

4. Tax Benefits

In addition to providing financial security, term insurance premiums are eligible for tax deductions under Section 80C of the Income Tax Act, up to ₹1.5 lakh per annum.

5. Inflation Protection

The incremental increase in sum assured ensures that the death benefit maintains its real value over time, mitigating the impact of inflation.

6. Long-Term Financial Planning

For individuals in their 30s or 40s whose household expenses are projected to increase significantly over the next few decades, an increasing term plan is ideal to ensure adequate financial protection.

How to Get an Increasing Term Insurance Plan?

Purchasing an increasing term life insurance plan can be accomplished efficiently through online platforms. Here's how:

Research and compare

Look for policies offering increasing life insurance coverage, comparing features and premiums.

Choose your coverage

Select your coverage and compare based on your needs and future obligations. Make sure to compare policy terms, riders, and premium structure.

Use a premium calculator

Various insurers offer tools that can help you estimate the premium cost of your life insurance online.

Submit documents

Submit the necessary documents, including age, income details, and medical history.

Complete the purchase

After approval, finalise the policy and pay the first premium.

Key Benefits of an Increasing Term Insurance Plan

Individuals expecting an increase in financial obligations might want to consider increasing term insurance for long-term protection. Here are the primary advantages you should know about:

Future-proof coverage

Protects against inflation and rising costs of living.

Better for younger policyholders

The coverage grows as responsibilities increase with age (children, loans, etc.)

Enhanced financial security

Ensures that beneficiaries receive sufficient support in the long term.

Flexible premium structures

Depending on the policy, premiums may remain constant or increase in alignment with the escalating sum assured (less common).

Additional Riders

Adding riders such as critical illness, accidental death benefit, or waiver of premium can enhance your policy’s coverage and provide extra financial protection in specific situations.

Tips Before Buying Increasing Term Life Insurance

Here are some things to keep in mind before purchasing:

Explore various insurers to learn how they handle increasing coverage.
Select a policy issued by an insurer with a good claim settlement ratio.
Make sure the policy suits your future income and growing responsibilities.

Conclusion

Increasing term life insurance is a tactical measure to deal with inflation and prepare and adjust for future financial responsibilities that may increase. Take time to review each of the options available, read the fine print, and select a plan that suits your needs. After all, life insurance is about financial security for your loved ones in the event of an unforeseen event.

FAQs

Q1: What Is Increasing Term Life Insurance?

Increasing term life insurance is a type of term plan where the sum assured increases every year by a fixed percentage (like 5% or 10%).

Q2: Can we increase term insurance cover after buying?

Increasing term life insurance automatically raises your coverage each year as part of the policy’s structure. If you’re wondering how to increase term insurance cover mid-term, speak with your insurer.

Q3: Can I increase my term insurance amount if my responsibilities grow?

Yes. If you're concerned about a growing family, rising loans, or other liabilities, increasing term insurance is ideal. It’s designed to allow you to increase your coverage over time without requiring a new policy or fresh underwriting.

Q4: What is increasing term insurance used for?

Increasing term insurance ensures your life cover keeps up with rising living costs and financial responsibilities over time.

Q5: How much does term life insurance increase?

There are various policies where the rate rises 5% or 10% yearly. Always review the terms of your policy for all the details.

Q6: How can we increase term insurance coverage?

In an increasing term insurance plan, the cover increases automatically every year by a fixed percentage. Additionally, ACKO’s highly flexible plan, the ACKO Life Flexi Term Plan, allows you to increase your life cover as your financial needs grow. Not just that, you can also make changes to the policy term, premium payment frequency, and more, offering complete control over your coverage.

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.