Everyone across society is slowly realizing the necessity of having a life insurance cover. With life increasing its pace and uncertainties rising by the day, all families need a life cover. It enables them to deal with the loss of a loved one, at least financially. And to meet this increasing demand for life insurance, all insurance providers are coming up with numerous types of insurance plans that cater to varying needs.
It is solely why it might appear challenging to choose the right plan in such a complex marketplace. The best way to analyze the plan that suits your requirements is to use an insurance calculator.
When you opt for a term insurance plan, you consider factors such as income, expenses, liabilities, assets, and financial goals. And nowadays, you can easily decide the monthly, quarterly, half-yearly, or yearly premium amount. You can use an insurance calculator to figure out how to reach your life goals.
However, life goals change, and financial needs increase with different stages in life. And if you wonder how to take care of these changing dynamics, the answer is to choose a term insurance plan with increasing cover.
The sum assured in the increasing term insurance plan increases by a predefined amount every year to adjust against your needs. Unlike the regular plan, it allows you to increase the sum assured during the policy period. Note that the premiums in an increasing term plan may change or remain constant throughout the policy tenure.
How Does Increasing Term Insurance Plan Work?
You can read the example given below for better understanding:
Raj Singh is a 28-year-old man who buys an increasing term insurance plan with a sum assured of Rs 30 lakh. Although he is sure about his financial goals, he wants to ensure that his family has enough to stay on track with their life goals. Using a life insurance premium calculator, he has also calculated the amount of premium he has to pay every year.
In this policy, the sum assured increases by 5% yearly. So, if he bought the policy on Jan 15, 2020, his sum assured the next year would increase to Rs 31.5 lakh. Consequently, it will keep on increasing until it reaches twice the amount (60 lakh). Although, it can only happen if the tenure of the term plan is long enough for the sum assured to get doubled.
Generally, it is in this manner that the sum assured in increasing term insurance rises every year.
Benefits of Term Plan with Increasing Cover
The following benefits make a term plan with an increasing cover a lucrative option:
- More Backup for the Family
Financial stability is the basic reason why people opt for any insurance, and rightly so. You, too, would analyze your financial planning, opt for an insurance calculator, and then choose any plan. However, in case of your sudden demise, the lives of your family members would turn upside down. Term life insurance provides the entire sum assured at the time of death and can make the life of the remaining family members more comfortable, albeit financially.
If you have a term plan with an increasing cover, the sum assured will keep increasing during the policy tenure. Meanwhile, if you are not around due to an untoward event, there will be a bigger financial backup for your family.
- Easy to Handle Financial Responsibilities
Every individual plans to fulfill all their dreams at different stages of life. Like if you plan to get married, you and your spouse will plan to buy a new house or car. And to purchase any of these, you would require a considerable amount of money. You may opt for auto loans, home loans, or personal loans.
Generally, the proceeds from most types of insurance can help you pay off your loans along with interest. But in your absence, your family will get burdened with these responsibilities. However, you can ensure that they are able to handle such situations if you opt for a term plan with increasing cover. So, use an insurance calculator and plan your finances accordingly.
- Lifestyle Maintenance
Everyone has a certain lifestyle. You work hard for the upkeep of this lifestyle for yourself and your family. But if you are not around, the maintenance of such a lifestyle can be a challenging task. Your family may not be able to meet the rise in the cost of living due to inflation.
But with an increasing cover term plan, you can assure that your family members do not have to face any trouble. They can continue living in their set lifestyle without any hindrances. However, it will be beneficial to charter these expenses and then use a life insurance premium calculator to choose a suitable term plan.
For more coverage, you can also choose to add riders to your term plan with an increasing cover that will require paying an extra amount of premium. Using an insurance calculator will provide you with an accurate premium amount. However, keep in mind that as directed by IRDAI rules, the total rider premium under all riders cannot exceed 30 % of the base plan premium.
You can compare the different plans provided by numerous companies and make a suitable choice!
Sources:
https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/TAC1718/512N315V01.pdf
