Insurance is a wise man’s decision. Life is quite unpredictable, and insurance allows people to provide immediate support to a person’s dependents in case of their sudden death. Realising the significance of having insurance, the market is flooded with various types of insurance plans. Term Insurance is one such type of life insurance policy.
What is a Term Insurance?
Term Insurance is the type of life insurance policy that is valid for a specified time frame generally referred to as “term”. This means that the policy provides coverage or death benefit if the policyholder dies in the period specified within the policy.
With many life insurance policies available within the market, the question of why choose “Term Insurance” over other policies may arise in the minds of potential policyholders. To relieve the people from this dilemma, listed below are the benefits of a Term Insurance plan;
- Term Insurances are less expensive than Permanent Life Insurance policies since they provide death benefit instead of cash benefit.
- Provides policyholders with the freedom of choosing the term, indirectly the premium amount and sum assured based on their financial goals and capacities.
- To keep up with life’s changing dynamics, Term Insurance policies provide an option for increasing coverage within the term period.
What is the “increasing coverage” option available with Term Insurance?
At different stages of life, the life goals of a person change. Not only goals, but a person’s financial status is sensitive to various external factors like age, inflation, lifestyle and healthcare expenses. Hence it is highly advantageous if the premium amount and sum assured of an insurance policy suits the current financial capabilities and the future financial needs of a policyholder. This is the idea behind the Increasing Coverage option in a Term Insurance policy.
In an increasing term insurance plan, the sum assured increases by a predefined amount every year until completing the policy term. Generally, all insurance policies have an option to extend or renew a policy after the completion of its term. But the new premiums will be dependent on the person’s age and health at the time of the renewal. It may cause the new premium values to be higher or impose limitations on other benefits. These restraints can be avoided if one chooses an increasing term insurance plan.
Benefits of increasing coverage option in a term insurance plan
- The premium in a term insurance plan generally remains constant. In case of an increasing term insurance plan, the premiums may increase according to the increased death benefit. But this gives the policyholder the advantage of paying a lower premium early on in life to adjust to their financial conditions.
- The benefit of the increasing term insurance plan can match inflation in the market. Thus the policyholder can rest assured that their family will survive the increasing financial needs even in their absence.
Thus increasing term insurance policy can adjust to the different financial conditions at different stages in life, giving the policyholders a chance to keep up with the economic dynamics.