Increasing Term Insurace

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Term insurance plans are of great use to almost everyone. A term plan offers a wholesome life cover at a very reasonable price. This is handy as people from all walks of life can afford life insurance, thanks to the term insurance plans. Term plans offer a pure life-cover. 

A term plan is a no-frill life insurance policy that takes a small premium and just covers your life. If you die within the policy period, your nominees receive the sum assured and the policy terminates. If you outlive the policy period, the insurer is not obligated to pay you anything. This is the reason why term insurance is so affordable. There are some variations available in term insurance. 

One of them is the increasing term insurance plan. Here, the sum assured increases as the policy progresses. This is a very helpful life cover. Let us learn more about the increasing term plans in the article below. Take a look.

Key features of Increasing Term Insurance

So what exactly are the features that make up a term insurance plan?  Let us take a quick look:

  • Increasing Cover - As mentioned above, an increasing term insurance plan has an interesting feature of the coverage amount rising. At the end of every policy year, the sum assured goes up by a pre-decided percentage. As a result, you get a higher life cover as the policy progresses. If you die at the end of the 5th year, your family may get a sum assured of INR 24 lacs. Under the same term plan, your family will get INR 29 lacs if you die after the 10th year. This is the best and the most popular feature of an increasing term insurance policy.
  • Steady Premium - A majority of the life insurance companies have a fixed premium for the increasing term insurance plans. This means the premium remains fixed for the entire duration of the plan, even when the sum assured keeps increasing. This makes it easier for the policyholder to manage and plan for his financial liabilities at an affordable rate. However, some insurers do charge a higher premium after a few years. In other words, the premium amount does not remain static for the entire policy period. Read the policy wordings carefully to understand the clauses before you buy the best-increasing term insurance plan for yourself.
  • Long Policy Tenure - Typically, the increasing term insurance plans available in India are available for tenures as high as 30 years. This helps the policy to stay covered until as long as he wants. For instance, if a young parent wants to buy an increasing term insurance plan to cover the financial wellness of his young children, he can ensure the coverage is available for the kids to meet all their financial milestones with ease. The plans are also available for shorter durations such as 10 years.

These are the key features that help you to understand what to expect from the best increasing term insurance policy that you buy.

How does an Increasing Term Insurance Plan Work?

Sunil buys an increasing term insurance plan for INR 20 lacs for a tenure of 30 years. He agrees to the coverage amount increasing by 5% every year, till the sum assured reaches a maximum of 200% of the original coverage amount. By this calculation, the sum assured rises till the 20th year and reaches the sum of INR 40 lacs. He dies anytime in or after the 21st year, his family will get a fixed sum assured of INR 40 lacs. This is how increasing term life cover broadly works.

Let us now understand the other processes involved in increasing term insurance:

  1. Buying the Plan 
    It is very simple to buy an increasing term insurance plan. The process is no different from buying a standard term insurance plan. You can buy the policy online or offline. If buying online, you can visit your insurance company’s website directly and make the purchase. If you are unsure of the plan you want, you can run an online comparison, locate all the plans and then choose the best option. This works well as you find the best plan at the best rate. If you wish to buy the policy offline, you can do so by visiting your insurance provider’s branch. Or, you can contact an insurance agent and get the plan from him or her. Just ensure you read the policy brochure carefully before purchasing a suitable increasing term insurance plan.
  2. Claim Process 
    The claim process is quite simple too. After the death of the policyholder, the nominee needs to inform the insurance provider at the earliest, ideally within 24 hours. Then, the claim form needs to be duly filled in and submitted, along with the policy documents, the death certificate and the FIR (if available). As a policyholder, you should inform your nominees about the claim process well in advance and also tell them where you store the important documents. This will help them to get the claim in your absence. An error in filing the claim can lead to the entire claim being rejected.
  3. Riders - 
    Riders are available with all increasing term insurance plans. Riders are add-on covers that you can buy at an added cost. This helps you to increase the scope of coverage. There are many increasing term insurance riders available, including:
    1. Waiver of Premium Rider - You can opt for the waiver of premium rider. If you have this rider, you will not have to pay any future premium if you are left permanently disabled in an accident. The life cover, however, will continue to be in force.
    2. Critical Illness Rider - The critical illness rider promises to pay a sum assured if you are diagnosed with a critical illness such as cancer, stroke or organ failure. You will get the amount as soon as a diagnosis is made. You can then use the money for any purpose such as paying off loans, travelling abroad for treatment, etc. This is one the handiest as well as most popular riders available along with the increasing term insurance policies.
    3. Accidental Death Benefit Rider - The accidental death and disability rider pays an extra sum assured if you are left disabled or dead in an accident. This amount is over and above the life cover offered by the base increasing term insurance policy.
  4. Tax Benefits - 
    You get the usual life insurance tax benefits available under Section 80 C when you buy an increasing term insurance policy. There are tax rebates of up to INR 1.5 lakhs available in a year for the premium you pay towards the term insurance coverage.

What is Covered in an Increasing Term Insurance Plan? 

There are some very useful covers available in an increasing term insurance policy. Some of them are:

  • Increasing Life Cover - The increasing term insurance plans offer an increasing life insurance cover. This is the largest and the primary cover available under the increasing term insurance plans.
  • Add-on Covers - The add-on covers, though an option, are readily available with the increasing term insurance policies. You can get the critical illness rider, the accidental death benefit rider and the waiver of premium rider, over and above the standard life cover available.

What is not Covered in an Increasing Term Insurance Plan? 

A term insurance plan offers a pure life cover. It does not offer any frills. If you have such a plan you do not get:

  1. Return Component - There is no return component available in an increasing term insurance plan. This means, if you survive the policy period, there is nothing to expect in return.
  2. Maturity Benefit - Unlike an endowment plan, a term insurance plan, including an increasing term insurance plan, does not offer a maturity benefit when the policy tenure is completed.
  3. Compensation for Suicide or Illegal Death - If the policyholder dies via suicide within the first year of the policy, the claim will not be paid out. Also, if the death happens due to substance abuse, hazardous sport participation, anti-social activities, etc, the nominees cannot file a term insurance claim.

These are the main exclusions listed under the increasing term insurance plans. Every plan is different and so you need to read the policy wordings to understand the exact exclusions of the particular increasing term insurance plan that you have purchased.

What are the Benefits of Increasing Term Insurance? 

The increasing term insurance plans are full of benefits. Some of these include:

  1. Wholesome Life Cover - As in all term insurance plans, in the increasing term insurance plans too, you get a comprehensive life cover. This is a major benefit that allows you to protect your loved ones against all kinds of financial hardships that may fall on them after you die.
  2. Affordable Cost - Since an increasing term insurance plan offers a pure life cover, it is a very affordable form of life insurance. You can get the plan by paying an economical premium. You can get your life covered without having to stretch your finances too much and this proves to be very beneficial.
  3. Helps Beat Inflation - The increasing term insurance plans help you to beat inflation. You can keep your family secured for their financial needs, keeping the inflation in mind. For instance, 20 years down the road when your child starts college, the fees will be a lot higher than what it is now. If you are not around at that time, you need to make provisions so that your child gets admission in the college he wishes. Buying an increasing term insurance plan helps you to achieve this goal.
  4. Multiple Payout Options - To make the financial journey as smooth as possible for your loved ones after your demise, you can act ahead and choose a suitable increasing term insurance payout option for them. These plans offer multiple payout options such as the lump sum payout, the staggered payout or the combination payout. Let us understand each:
    • Lump-sum Payout - Here, the entire sum assured is paid to the nominee upon the policyholder’s death. The amount is paid in one go and the policy is terminated then and there.  
    • Staggering Payout - Here, the sum assured is broken up in smaller installments and paid to the nominees over a period of time. The policy terminates after the last installment is paid out.
    • Combination - Here, a part of the sum assured is paid as a lump sum. The remaining amount of money is kept in a fund and released at fixed intervals. The installments are given to help the family pay their regular bills and stay financially cushioned.

Choose the option that suits you and your family the best and make a good decision to help them to the fullest.

  • Offers Tax Benefits - As mentioned above, tax benefits up to INR 1.5 crores are available in a year for the or you pay for your increasing term insurance plan. Then, the proceeds received by the nominee after the death of the policyholder are also tax-free. This helps the nominees to deal with the financial crisis after the death of the policyholder.

These are some of the best advantages you get when you buy an increasing term insurance policy.

Who Needs an Increasing Term Insurance Plan? 

There are many people who can benefit from an increasing term insurance policy. Here are some of them:

  1. A Young Person - 
    If you are a young person, who has just started earning and are still single, an increasing term insurance plan may work for you. You will get the policy at a low rate. Later on in life, you will get married, have kids, buy a house, etc. In other words, your expenses will keep going higher and higher. It is thus a good idea to stay prepared by getting a good increasing term insurance policy.
  2. A Parent of Small Kids - 
    Your children are your greatest responsibility. You need to take care of their wellbeing, whether you are around or not. Buy an increasing term insurance plan and ensure they don't have to quit their studies or give up on any dream later in life if you die early.
  3. A Person Who has Dependent Parents - 
    If you have elderly parents, siblings or other family members who are wholly dependent upon you, you need an increasing term insurance plan. Your parents’ health may deteriorate and they will need greater health care which will be more and more expensive. Keeping these factors in mind, you must go for an increasing term insurance plan.

These are some people who benefit from buying an increasing term insurance cover,

What are the Best-increasing Term Insurance Plans in India? 

Now let us take a look at the top-selling increasing term insurance plans in India:

Name of PlanBrief Description
Aditya Birla Sun Life Insurance Protect@EaseThis is an excellent increasing term insurance plan that offers a high sum assured of up to INR 30 lacs. The sum assured can go up by 10% per year. Riders are available with this plan.
Aditya Birla Sun Life Protector Plus PlanAnother good increasing term plan from ABSLI, the plan offers a high sum assured of up to INR 30 lacs. The death benefit rider is an in-built feature of this life insurance policy.
SBI Life Smart ShieldSBI Life offers this very handy term life plan with an increasing sum assured. You can get a maximum coverage amount of INR 25 lacs. The sum assured increases at a rate of 5% per annum. You can get some riders with this policy.
SBI Life eShield PlanThis plan offers a maximum sum assured of Inr 25 lakhs. The coverage goes up by 10% each year.

How to Buy an Increasing Term Insurance Plan? 

You can buy increasing term insurance plans online or offline. You can get the plan from your insurance provider’s website or from the portal of an insurance aggregator. You can also buy the plan offline by visiting your insurance company’s office or through a life insurance agent.

Increasing Term Insurance Frequently Asked Questions

  • 1. Is it wise to invest in an increasing term plan?

    It is a very good idea to invest in an increasing term insurance plan. You can beat inflation and offer the right type of financial cover for your family. Expenses and responsibilities keep increasing as you age and so your life cover should ideally also increase. This is exactly what happens in an increasing term insurance plan.

  • 2. Is there a return of premium option available?

    No, the return of premium option is usually not available in increasing term insurance. There are no return components available here. You only get a pure life cover where you pay the premium and if you die, your family receives the death benefit. If you outlive the policy period, you do not get anything back.

  • 3. Whom should I nominate as my beneficiary?

    You can nominate your spouse, your children, your parents, your siblings or any other close relative as your beneficiary when you buy an increasing term insurance plan. You can have a single nominee or multiple nominees. Your nominees should ideally be those who are financially dependent on you.

  • 4. Can I cancel or surrender an increasing term insurance plan?

    Yes, most life insurance companies allow you to cancel the increasing term insurance plan within the free look period, which is within the first 15 days of buying the plan. The policy can also be surrendered later. You need to inform the insurance provider, fill in the surrender form and they will do the needful. 

  • 5. Does LIC have an increasing term insurance plan?

    No, LIC does not have an increasing term insurance plan on offer at present. Other reputed life insurance providers like SBI Life and Aditya Birla Sun Life Insurance have these plans on offer.

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