Increasing term insurance policy: All you need to know
Insurance companies increase the sum assured based on the health of the policyholder while buying the policy.
Term insurance is considered one of the important parts of financial planning. It is a pure protection plan. In the unfortunate event of the demise of the insured, a term life insurance policy pays a fixed amount, which is called sum assured, to the nominee or beneficiary of the insured. One can buy term life insurance seven to 10 times of his or her annual income. In an increasing term insurance plan, policyholders can increase the sum assured amount every year at any time during the policy term.
The insurance company increases the sum assured based on the health of the policyholder while buying the policy. The rate of increase in coverage is decided on the commencement of the policy. This rate cannot be changed during the policy tenure. Usually, the increased sum assured amount cannot cross twice of the original sum assured amount.
Change in premium
Increasing term insurance plans have higher premiums than a regular term policy. It also entails a higher premium every year.
Riders
Policyholders can also buy riders to increase the scope of coverage at a nominal extra cost. Critical illness benefit rider, waiver of premium rider and accidental death and disability riders are among the most popular riders that one can buy.
Benefits
Take a look at some of the benefits of an increasing term insurance plan.
Tax benefits: Like any other term insurance plan an increasing term insurance plan also allows policyholders to deduct premiums paid under section 80C of the Income Tax Act which help policyholders to save money in the long run.
Affordable: The increasing term insurance plan is one of the most affordable life insurance products available on the market.
Life goal: The increasing life cover will fit with your life goals regardless of when you purchase the increasing term insurance plan.