Increasing Term Insurance
Increasing term insurance is term that provides a death benefit that increases at periodic intervals over the policies term. The amount increase is usually stated as specific amounts or as a percentage of the original amount. It may also be tied to a cost of living index, such as the Consumer Price Index. Increasing term insurance may be sold as a separate policy, but is usually purchased as part of a package or as a cost of a living rider policy.
This can be a good option for people who want to make sure that their loved ones are financially protected, even if their income or expenses increase over time.
The amount that the death benefit increases each year is typically set at a fixed percentage, such as 5% or 10%. The premium for increasing term insurance is also typically higher than for a level term policy, because the insurance company is taking on more risk by increasing the death benefit.
Here are some of the pros and cons of increasing term insurance:
- The death benefit increases each year, which can help to protect your loved ones from inflation.
- You can typically get increasing term insurance with no medical exam, which can make it a good option for people who are in poor health.
- Increasing term insurance can be a good way to keep your life insurance coverage in line with your changing financial needs.
- The premiums are typically higher than for a level term policy.
- You may have to reapply for the policy each year, which can be a hassle.
- If you make a claim, the insurance company may only pay out the original death benefit, not the increased death benefit.
If you are considering increasing term insurance, it is important to weigh the pros and cons carefully. You should also talk to an insurance agent to get more information about the different policies available.
Here are some additional things to keep in mind about increasing term insurance:
- The maximum amount that the death benefit can increase is typically capped.
- The insurance company may require you to undergo a medical exam if you want to increase the death benefit by a large amount.
- You may have to pay additional premiums if you want to increase the death benefit.