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Incremental Term Life Insurance Policy : All You Need to Know

An incremental term insurance plan is a type of term insurance where you can increase your policy cover by a certain amount every year.

  • 4,602 Views | Updated on: May 31, 2024

One of the best things that you can do to safeguard your family’s future is purchase a term insurance policy. A term insurance plan requires that you pay regular premiums to the insurer and if, under unfortunate circumstances, you pass away, your family will receive a lump sum claim amount known as the death benefit or the assured sum. In your absence, your family won’t have to worry about expenses since the payout has the potential to cover everything from your children’s education, marriage, daily expenses, EMIs etc.

Now a vanilla term insurance plan might just work for you. But you do also have to consider inflation and decreasing purchasing power of consumers. You bought term insurance with the best intentions, to protect your family from financial troubles. But what if the insurance payout they receive is not enough? Term insurance usually lasts for 20-30 years, so we cannot accurately judge how much of an assured sum would be enough for our family so far into the future.

And herein lies the beauty of incremental term insurance plans. An incremental term insurance plan ensures that your assured sum is increased by a certain amount every policy year. This means that the assured sum 5 or 10 years down the line would be much higher than what it was initially. This can help your family counter inflation since the amount they receive would be sufficient.

Let us look at incremental term insurance in detail.

What is incremental term insurance?

An incremental term insurance plan is a type of term insurance where you can increase your policy cover by a certain amount every year. For example, if you purchase a policy of Rs. 1 crore for a period of 20 years, then for every year after you buy the policy, the assured sum of Rs. 1 crore would incrementally increase by a certain percentage amount that is decided beforehand. This means that, say, at the end of 10 years if something were to happen to you, your family won’t just receive the Rs. 1 crore, but an amount that increased incrementally over the last 10 years.

The value of the assured sum offered by a standard term insurance may depreciate over the years and your family may find that the amount is insufficient. And hence an incremental term insurance can be highly beneficial to counter inflation and ensure that your family always will have enough funds to carry on with their lives.

Premium For Incremental Term Insurance

When you have such a great benefit of having increasing life cover, there is bound to be a small caveat. As compared to regular term insurance, incremental term insurance premium may be slightly on the higher side. Additionally, the premium can either remain the same throughout the tenure or increase every year depending on the terms of the policy.

Advantages of Incremental Term Insurance

- It helps you beat inflation since the cover increases every year.

- It is economical since premiums for term insurance are very affordable.

- It helps safeguard against a future with increasing financial needs.

- It can help you save on taxes under Section 80C

Thus, incremental term insurance plans have excellent benefits. If you’re planning to buy term insurance, make sure you go for increasing term insurance to completely protect your family’s future.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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