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An increasing term insurance plan is a dynamic financial tool where the sum assured grows by a predetermined rate each year. It is designed to grow as your life evolves, counteract the effects of inflation, and automatically adapt to your growing financial responsibilities over time.
An increasing term life insurance plan is a unique life insurance product where the sum assured (the payout to your nominee) increases automatically at a pre-set rate during the policy term. Unlike a standard level term plan, where the coverage remains fixed, this plan is engineered to ensure your financial protection keeps pace with your rising income, growing family responsibilities, and the eroding effect of inflation.
It is a proactive way to secure your family’s future, ensuring the coverage that is adequate today remains adequate a decade from now.
The way this plan works is simple. When you buy the policy, you select a base sum assured. You also select the rate for its annual increase. While your coverage grows each year, your premium typically stays fixed for the entire policy term.
For example:
You buy an increasing term plan with a base sum assured of ₹1 crore and a 5% simple annual increase.
This continues for the life of the policy. The enhancement is automatic. You do not need new medical tests or extra paperwork. It is a hassle-free way to boost your financial protection.
There are several key features that make increasing term policy a smart choice for long-term planning, such as:
Choosing this plan gives you several clear advantages, including:
Now, to thoroughly understand what is increasing life insurance, you must understand the plan’s core parts before you buy.
The premium is typically fixed for the whole policy tenure. This happens even as the sum assured increases every year. The premium amount is calculated when you start the policy and is based on your age, health, the policy term, and the base sum assured. The cost is usually slightly higher than a level term plan’s, as it already accounts for the future benefit increases.
The sum assured grows in two main ways:
Most insurers cap the maximum sum assured at double the initial coverage.
Riders are add-ons that offer extra protection. You can attach them to your increasing term plan to build a stronger safety net. Common options in increasing term insurance rider include:
This plan is a particularly good fit for certain people:
This plan increases your coverage automatically. Still, you should review your total coverage during major life events. These events are signals that you might need more:
The purchasing process is straightforward. Here is how you can buy an increasing term insurance policy:
1. Assess Your Needs: Calculate your current and future liabilities, income, and goals. Use this to determine the right base sum assured.
2. Compare Insurers: Research plans from different companies. Check their claim settlement ratio, premium rates, and the increased rates they offer.
3. Choose the Rate of Increase: Select the percentage that best matches your expected financial growth.
4. Undergo Medical Examination: Complete any medical tests required by the insurer.
5. Pay the Premium: Pay the first premium to activate the policy once your application is approved.
An increasing term insurance plan is more than a policy. It is a dynamic financial strategy. In a world of constant change, it provides a flexible and smart solution. The plan automatically scales your coverage to match your life. Understanding the increasing term insurance meaning helps you ensure the financial security you leave for your loved ones is never overtaken by inflation or new responsibilities and emerges as an intelligent choice for anyone building a truly resilient financial safety net.
1
For most of these plans, the premium is fixed for the entire term. The initial premium is calculated to account for all the scheduled increases in the sum assured.
2
Yes, insurers usually offer a few options. You can often choose a preset percentage, such as 5%, 8%, or 10% per year, when you purchase the policy.
3
If you stop paying premiums, the policy enters a grace period, usually 15-30 days. If you do not pay within that time, the policy will lapse, and all coverage benefits will stop
4
Yes, the initial premium is typically higher than a level term plan for the same base coverage. The higher premium reflects the guaranteed increase in the death benefit over the policy’s lifetime.
5
Generally, no. You cannot convert a level term plan into an increasing one. They are structured as different products. You would need to purchase a new increasing term insurance policy.
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.
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
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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