Term Insurance with Increasing Cover: What You Need to Know

Written by : Knowledge Centre Team

2023-05-23

886 Views

Locate branch

Resume journey

Pay Premium

An increasing term insurance plan is a type of term plan where the base sum assured increases. Your financial situation may vary from time to time. The sum assured chosen by you during the inception of the plan may not be adequate in the future due to inflation.

The increased cover helps you to stay protected and aligned with your financial goals. The more the cover, the better you are protected. A term insurance plan is a pure protection plan that offers a death benefit to the beneficiaries when the policyholder passes away. So, it helps your family manage the financial shock in your absence.

What is Increasing Term Insurance?

In an increasing term insurance plan, the sum assured increases by a predefined amount every year till the policy term. You can increase the sum assured to meet your life goals.

Insurance policies can be extended or renewed after the completion of their term. But the premium will be dependent on the person’s age and health at the time of the renewal. It may cause the new premium values to be higher or impose limitations on other benefits. These restraints can be avoided if one chooses an increasing term insurance plan.

For example, you can buy term insurance with an increasing cover option if you have a family.

At different milestones, you can increase the cover amount to meet the protection needs.

Canara HSBC Life Insurance iSelect Smart360 Term Plan has an increasing cover option that allows you to increase the sum assured by 10% every year after the completion of every policy year.

Also, with the Block your Premium option, you can increase the base sum assured by up to 100% at the same premium rate.

How Does an Increasing Term Insurance Plan Work?

Increasing term insurance plans are one of the best financial instruments to beat inflation.

Let us consider an example to understand how this plan works. The premium and sum assured will vary as per the terms and conditions of the policy purchased and the insurance company.

Mr. Himank bought an increasing-term insurance policy when he was 30. He decided to have a sum assured of ₹50 Lakhs for a policy term of 30 years. The plan provides a 5% annual growth in the sum assured amount, up to a maximum increase of 100% of the base sum assured.

Policy Year	Sum Assured
Year 1	₹50 Lakhs
Year 2	₹52.50 Lakhs
Year 3	₹55.12 Lakhs
Year 4	₹57.88 Lakhs
Year 5	₹60.77 Lakhs

The sum assured will keep on increasing every year till the policy matures. However, it can only go up to 100% of the original sum assured and not more than that.

Benefits of Buying an Increasing Term Insurance Plan

There are various benefits of an increasing term plan. Let us know more about each one of them in detail.

Beats Inflation

The increasing cover will help you fight the inflation. The sum assured amount that is effective today may not be adequate tomorrow. To beat the inflation, you will need an increased sum assured for the future. This plan gives you the chance to fight against inflation.
Meets Changing Financial Goals

The cover will help to meet your ever-evolving financial goals. Your financial needs may change as you grow in life. For example, the term insurance cover that was sufficient for you when you were single will never be enough when you get married.
Affordable

The premiums of an increasing term insurance are low and affordable. It depends on your life insurer if the premium of your term plan will increase or remain same. Check the terms and conditions of the plan before you decide on something.
Helps Save Tax

An increasing term insurance plan helps in saving tax under Section 80C of the Income Tax Act. The death benefit received by the nominees of the plan is also tax free.
No Additional Underwriting

As the base sum assured can be increased in the same term plan, you do not have to go through underwriting process again. However, if you apply for a new term plan, you will have to go through the same process.

Our goals may change at different life stages. These goals may be impacted by factors such as age, inflation, lifestyle and healthcare expenses. Hence, the coverage of your term insurance policy may be adequate to support your future financial demands. An increasing term insurance policy can adjust to the different financial conditions at different stages in life, giving you a chance to keep up with the economical dynamics.

FAQs Related to Increasing Cover Option in Term Plans

Opt for an increasing cover term insurance plan that will allow you to increase the cover amount. Or, if you have a spouse and that is the reason you want an increased cover, you can add them under the same policy.

Mostly, the plan is used to mitigate the effect of inflation. Also, as we grow in life, our responsibilities also increase. To help you align with your life goals, you will need an increasing term insurance.