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Increasing Term Life Insurance

Increasing Term Life Insurance

Category: Insurance

Updated: 12/08/2016
First Published: 12/08/2016

What is increasing term life insurance?

In simple terms, increasing term life insurance is the exact opposite of decreasing term life insurance: the sum insured increases over the life of the policy. The premium may or may not remain the same, but the cover is always based on the health of the insured at the time the policy was originally taken out.

Increasing term life insurance addresses the reality of inflation and/or changing circumstances. It allows the payout to increase over time, the level of which is determined either periodically on a set date, or when an event (e.g. marriage, birth etc.) triggers an increase.

It makes sure that there is a 'real terms' or scaled-up payout on the event of death which would be appropriate to the circumstances or the effects that inflation has had since the life insurance policy was originally taken out.

Why buy increasing term life insurance?

Increasing term life insurance provides the option of increasing the level of cover either at set intervals (e.g. annually on the start date of the policy) or specific events (e.g. marriage or the birth of a child).

Premiums may increase for additional cover, but they are based on your health at the start of the policy, even if it has deteriorated since. It is an 'automated' way of staying on top of your commitments for your dependants and family.

Increasing term life insurance is designed to combat inflation, increasing the sum insured throughout the policy. It offers flexibility and is designed to adapt if you have changing circumstances over the term of the policy: for example, if you have children or if your income increases, a greater payout will be required to provide a suitable level of protection for your dependants. The benefits your dependants will receive upon your death, within the term of your life insurance policy, increases in return for paying higher premiums.

What Next?

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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