- What is an increasing term insurance plan?
- Some of the features of the increasing term life insurance plan are:
- 1. Premiums:
- 2. Benefits:
- 3. Riders:
- 4. Coverage:
- Benefits of an increasing term insurance plan are:
- 1. Beats inflation:
- 2. Affordable:
- 3. Helps in dealing with increased financial requirements:
- 4. Tax saving:
- Summing up:
- Common Queries:
All You Need To Know About Increasing Term Insurance Plan
Term insurance plans are among the most sought-after plans in the insurance sector. This is because of the high sum assured provided by the plan. It is advised that individuals must opt for a decent sum assured when purchasing a term insurance plan.
It would help if individuals purchased the term insurance online, as they can get access to different features. For instance, if they opt to buy the TATA AIA term plan online, they get access to the premium calculator, which will help them choose a suitable plan.
However, the liabilities, requirements, and the number of people dependent on the policyholder rise as they move ahead in life. Therefore, the insurance requirements will rise as well. For such situations, an increasing term insurance plan is the most optimal solution.
What is an increasing term insurance plan?
An increasing term insurance plan is a variant of the term insurance plan wherein the coverage amount selected by the policyholder when they buy the term insurance increases annually with a specific amount.
But, the premium rate under the plan may or may not be the same throughout the policy tenure. In increasing term insurance plans, the coverage provided through the plan will depend on the individual’s health at the time of term policy purchase.
The increasing term insurance plan is designed keeping in mind the increasing inflation rate and the changing insurance requirements that an individual will face when moving through different stages of life.
Some of the features of the increasing term life insurance plan are:
1. Premiums:
The premium rate of the insurance plan generally remains the same throughout the policy’s tenure, with the coverage increasing every year. When calculating the premium amount during the period of policy initiation, the insurance company accounts for the increase in the sum assured amount.
Therefore, the premium amount will remain the same for the entire policy tenure. Usually, the term insurance premium increases during the initial years of the plan and is high compared to the later years, as the company has to compensate for the lower premium when the sum assured amount increases later.
2. Benefits:
Akin to the pure term insurance plan, the increasing term plan provides only the death benefit. If the policyholder passes away during the policy’s tenure, the sum assured is offered to the beneficiaries. Some plans offer monthly income or annual payouts, wherein half of the sum assured is provided as a lump sum and the other half is provided as monthly income.
3. Riders:
The policyholder can add different riders to the plan to increase the coverage acquired from the policy. Some of the most common types of riders are:
- Waiver of premium
- Critical illness
- Accidental death
4. Coverage:
While the coverage in the increasing term insurance plan increases annually, there is a limit on the maximum increase of the sum assured amount in some of the plans. Once the limit is reached on the maximum sum assured, it will remain the same for the entire tenure. The increased rate of the sum assured is stated as a percentage of an absolute amount.
Benefits of an increasing term insurance plan are:
1. Beats inflation:
Since the sum assured amount increases annually, the plan will provide the insured with a sum assured, which will beat inflation and provide them with the correct coverage.
2. Affordable:
A big advantage of buying the increasing term insurance plan is that it offers an affordable and low premium rate.
3. Helps in dealing with increased financial requirements:
As individuals grow, the number of dependents on them may increase as well. The increasing term insurance plan will help to increase the insurance coverage that the policyholder gets through the plan.
4. Tax saving:
The premiums paid for the plan are eligible for tax benefits as per Section 80C of the Income Tax Act.
Summing up:
An increasing term insurance plan is an optimal plan for young individuals who wish to be protected when their responsibilities increase in the future. But, when choosing the increasing term insurance plan, individuals should conduct a good amount of research to make the right decision.
Common Queries:
How can I increase my term insurance?
If you wish to increase the insurance coverage you get from a term insurance plan; you must opt for the increasing term insurance plan. The increasing term insurance plan helps you deal with the rising insurance requirements.
Can term insurance cover be increased?
Yes, if you opt for the increasing term insurance plan, the insurance coverage you get will increase.
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