Term Insurance 230 views September 15, 2019

Increasing Term Insurance

Increasing Term Insurance Plan in India

Having a term insurance plan as an essential financial tool to secure your loved ones is important. Moreover, there is an ardent need to choose an adequate amount of sum assured keeping in mind our dependents’ requirements in our absence. This can be done by factoring in our loans and liabilities, the value of our assets and their liquidity and other necessary considerations.

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However, estimating the correct amount of death payouts may be difficult. This is because nothing in life is permanent. Our financial situation changes every day as our monetary needs keep growing at every life stage due to the rising inflation rate. The impact of inflation is clearly evident from increasing prices, thus, explaining the need to opt for a higher life cover for life’s later stages. Life insurance companies in India, realizing the need for a higher sum assured, avail their customers the benefits of increasing term insurance policies.

What Is Increasing Term Insurance?

Unlike level term insurance plans in which the sum assured remains fixed throughout the entire policy period, increasing  term insurance policies are different in the sense that policyholders can opt for an increase in the sum assured each year by a specific percentage. In some cases, the sum assured increases by an absolute amount. The rate of increase is predetermined at the time of buying the policy proposal and may be simple or compounded depending on the insurer opted for.

Effect On Premium Charges

Depending on the terms and conditions of each life insurance company, the premium rates may increase or remain the same throughout the entire policy term. In most of the cases, the premium charges continue to remain the same. This is because the insurance company assesses the amount of the premiums to be charged, thus, resulting in uniform insurance charges throughout. Some insurance companies, however, prefer to charge higher premiums during the initial few years to compensate for the increasing sum assured at a later stage.

Customers opting for an increasing term insurance cover must remember that the corresponding premium charges of such plans are always more than level term policies or decreasing term life insurance policies.

Death payouts

Policyholders may choose whether they want their nominees to avail the sum assured in a lump sum or as a regular monthly income. Since the sum assured in increasing term insurance is considerably higher than the level term insurance options, policyholders often opt for a monthly or annual payout apart from receiving a part of the sum assured for their loved ones to ensure them a regular income over a period of time in future.

Add-on Riders

What if someone could promise you enhanced security at nominal charges? Add-on riders do just the same as paying for them helps policyholders avail specific benefits that would otherwise have cost a bomb. Policyholders can opt for add-on covers too to increase the scope of their increasing term insurance cover. Some of the riders that policyholders may choose from include:-

  1. Accidental Death and Disability Benefit Rider
  2. Critical Illness Rider
  3. Waiver of Premium Rider

The fact that riders added to an existing policy cost much lesser than when bought as a separate and standalone policy prompts many people to pay for them.

Why Opt For Increasing Term Insurance?

Many customers inquire about the feasibility of buying increasing term insurance over instead of the level term insurance plans that life insurance companies in India sell. The practicality of the idea depends on every customer’s need and long-term financial goals. Considering the rising uncertainty in today’s times, increasing term insurance serves as

  1. An effective guard against inflation
  2. Rising financial requirements
  3. An affordable financial tool
  4. A tax saving measure

Should You Pay For An Increasing Term Life Insurance Plan?

A term insurance plan is an essential financial instrument that one must have in order to secure the future of their loved ones. As costs keep going up, it becomes important to set aside an amount that would ensure their well-being even in the moment of loss and grief owing to the death of the policyholder concerned.

Customers looking for a way to help their dependents beat the economic inflation in future must opt for increasing term insurance that they can avail for nominal premium rates. Not all plans suit everyone. It is important to evaluate one’s own needs, lifestyle habits, financial liabilities, and occupational hazards before choosing a plan that works in favor of their nominees and dependents.