What is Increasing Term Insurance Plan?
Increasing term insurance plan is a type of term insurance. In case the policyholder passes away during the term plan period, the insurance company will pay the sum assured as per increasing amount. The increasing term insurance plan takes care of the financial stability of your family in your absence.
If the life assured passes away unexpectedly during the policy term, it ensures the cash flow is as per the financial needs of the family while taking inflation into account.
Term insurance is one of the most economical ways to provide a financial shield to your family in your absence. It offers a high sum insured life cover for the low premium amount as all the premium goes in life cover fund. And so, the financial gurus advise having a term life insurance plan is a must to mitigate the impact of unforeseen problems.
What else is there to Increasing Term Life Insurance Plan?
More than just a death coverage plan, increasing term insurance also has a tax exemption of up to maximum INR. 1.50 lakh as per section 80C of the Income Tax Act, 1961.
The age eligibility of the term insurance plan is usually between minimum of 18 years to a maximum of 65 years. It is advisable to get a term insurance plan at an early age as the premium increases with age.
It is advisable to get a term life plan at an early age as the premium tends to increase with age.
How an Increasing Term Insurance Plan Works?
Everyone’s approach is different to tackling a situation. People who think they want more protection in the future for them, then this increasing term insurance is the answer.
The cover in increasing term insurance plan increases at a predetermined rate over the years.
Increasing Term Insurance Example
If an individual buys a cover for INR. 1 crore with 5% increase each year, then after 10 years he or she will have a life cover of Rs.1.5 crore.
|Term of Policy||Life Cover Amount|
|Year 1||1 crore|
|Year 2||1.05 crore|
|Year 3||1.10 crore|
|..Year 10||1.50 crore|
What to Look for Before Buying an Increasing Term Insurance Plan?
The increasing term plan that you opt for should be capable of providing your nominee with money for kids’ education, marriage or any other responsibilities even in your absence. Check the rate of increase is sufficient to tackle inflation or future financial obligations.
Choose a plan that offers a maximum sum assured for the lowest premium to prevent the draining of your pockets.
Check terms and conditions
People often commit the mistake of not reading the terms and conditions, especially exclusions thoroughly. It is always advised to look upon the whole terms and conditions before finalizing on the plan.
Make sure that the insurance company you choose is credible in terms of its experience in the field, claim settlement process, etc.
Increasing Term Insurance Riders
Choose a plan that offers you essential riders like an accident, critical illness coverage, waiver of premium, etc.
Choose flexible plans, which means that the policy allows you to change the plan tenure according to your needs.
Claim settlement process
Make sure that the company you have opted provides you with quick and easy claim settlement procedures without much delay and hassles.
Good customer service
Make sure that the insurance company you have chosen can cater to all your queries and requirements in an efficient manner.
Best Increasing Term Insurance Plans in India 2019
- Max Online Term Plan Plus
- SBI Smart Shield
- HDFC Click 2 Protect Plus
Who Should Buy Increasing Term Life Insurance Plan?
Exclusions in Increasing Term Insurance Plan
Death due to Suicide or self-inflicted injury
Suicide is the primary exclusion in any life insurance plan. The claim won’t be accepted, and the death benefit will not be paid if the policyholder Suicides within the first year of the commencement of the increasing term insurance policy. If the policyholder commits suicide within the first year, then the insurance company will reject the claim and will payout only the insurance premiums minus the administrative expenses. Some insurance companies may have a two year waiting period for the suicide exclusion clause.
Death due to the incident related to Adventure sports
Term insurance gives coverage only to death risks that are purely natural, accidental, or due to critical or terminal illness, which is not in the capacity of the policyholder.
Adventure sports like auto racing, sky diving, rock climbing, bungee jumping are risky.
In such cases, where the policyholder is aware that such adventurous sports may cause an injury or death and still is doing on their own will, is not covered. A typical life insurance policy does not include any incidence that happens due to adventure sports. However, there are insurance plans which especially cover adventure sports but charge a higher premium for its coverage. Some insurance companies may give you a plan, but at a very high premium.
Private aircraft accident
Insurance companies do not cover private aircraft rides. Only commercial airlines rides are included. If a policyholder dies in and private aircraft accident, then the nominee will not get the insurance payout.
HIV or sexually transmitted diseases
HIV or sexually transmitted diseases are one of the exclusions of increasing term insurance policy. If the policyholder dies due to AIDS or any HIV related diseases, then the death claim will be rejected by the life insurance company.
The death claims due to illnesses are verified by the insurance company to ensure that the illnesses were not pre-existing when the policy was purchased. This is done to avoid the fraud cases of the claim. If a medical test is done during the application process of the plan, then it confirms the health status of the policyholder. At the time of claim, it becomes easy for the insurance company to process the claim. Or if Suicide is proved as a murder and the beneficiary is shown to be involved in illicit acts, then there is no payout.
Use of drugs or excess medicine dosage
If the policyholder dies of consuming illegal drugs or excess intake of medicines or of medicines other than prescribed by Doctor, then the claim will get rejected.
Claim on lapse policy
One of the critical aspects of a life insurance policy is the premium payment. The policyholder is required to pay the insurance premiums on time to ensure continuity of the plan. If the policyholder fails to pay the term insurance premium on the due date, then he/she gets one month of the grace period. Claims made during the grace period also get paid out by the life insurance company. However, if the premium is not made even at the end of the grace period, then the policy lapses. And there won’t be any payout for claims made post expiry of the policy.
Frequently Asked Questions
No, the term insurance premium remains constant every year for increasing term life insurance plans.
The life cover in the increasing term life insurance plan increases every year at a fixed percentage until the term of the policy.
An individual can buy multiple term insurance, but it is not recommended to be over-insured as the money on paying hefty premiums will be wasted. One can use online human life value (HLV) calculator to know the required life cover and plan their term insurance purchase smartly.
Life Stage benefits options mean at certain life stage events the insurer allows the policyholder to increase the life cover in term insurance in an affordable and hassle-free manner. The life assured may not also be required to go any medical test when availing the life stage benefit.
It depends from person to person. The premium of the increasing term insurance is higher than a level or decreasing term insurance plan. Hence term insurance should be chosen as per the circumstance and future financial obligations of a person.