Why Buy Increasing Term Insurance in These Trying Times
Term insurance plans play a crucial role in providing financial security to the policyholder’s family in eventualities. Therefore, you should opt for a higher sum assured to help your family maintain their lifestyle and live a financially stress-free life. It is vital to consider all your household costs, outstanding debts, medical expenses, and financial aspirations of your family members to help you decide the correct sum assured.
However, your life’s milestones can change with time. Therefore, you need to align your sum assured with the changing financial objectives. Besides this, the increasing inflation rate is another reason to opt for a higher sum assured. So, instead of buying multiple life insurance term plans, purchasing a growing term insurance policy is advisable.
An increasing term insurance policy is a type of term policy wherein the life cover increases every year. The primary purpose of this plan is to safeguard the policyholder’s family from the rising inflation rate and changing circumstances of life. Now when you know what an increasing term insurance policy is, let us understand its features.
This amount increases every single year until its maturity. However, some plans have a pre-defined limit on the hike. In such a case, the increment in the sum assured stops when it reaches the maximum permissible limit. Insurers pre-determine this rise in the sum confirmed. They may increase it by a specific amount or percentage. While purchasing the increasing term insurance policy, the insurer will inform you about this raise.
The premium remains constant throughout its duration in an increasing term policy, but the sum assured keeps rising. The premium for such a plan is higher than a conventional term policy.
Like a pure life insurance term plan, the increasing term policy offers only a death benefit to the nominees if the policyholder passes away during the plan’s period. The sum assured is determined as per the rate of increase in the particular year the policyholder took his last breath. The nominees get the death benefit as a lump sum. Insurers also offer a regular monthly payout option. Here, the nominees can receive the death benefit from a monthly income for a specific tenure, as agreed between the policyholder and insurer during policy initiation.
While buying an increasing term policy, you can also purchase riders at a supplementary cost. Riders can enhance your policy’s scope. You can invest in riders like accidental death benefit, accidental disability, critical illness, and waiver of premium, among others.
Advantages of investing in increasing term insurance
An increasing term policy:
Covers the cost of inflation
It would help if you had a term plan that could take care of the inflation aspect. As inflation is increasing gradually every year, your expenses also rise simultaneously. Therefore, while ascertaining the sum assured of the policy, you should take inflation into account. By doing this, you can ensure that your family members can handle all household expenses, medical costs, and their short-term and long-term aspirations easily. As the sum assured of an increasing term insurance policy increases every year, it can aid your family in covering the rising cost of inflation.
It comes at an affordable premium.
Though the premium of such a policy is costlier than that of a pure term policy, it is still pocket-friendly. Additionally, when you buy an online term plan, you get it at a cheaper premium.
Offers tax exemptions
You can reap tax benefits under Sections 80C and 10(10D) of the Income Tax Act, 1961. You can seek a maximum deduction of INR 1.5 lakh per annum on the premium paid for your term policy under Section 80C. Moreover, the death benefit received by your dear ones is tax-free under Section 10(10D).
When you buy term insurance online, ensure that you purchase an increasing term insurance policy. Such a policy can be helpful to cover inflation-related costs and the different turning points of life.