What You Need to Know About Increasing Term Life Insurance

Increasing term life insurance is a unique temporary coverage option that provides a benefit that grows over time. If you have plans to grow your family in the future or move to a bigger home, and you want more accessible and affordable coverage, an increasing term life insurance policy is an excellent option for you.

What is an increasing term life insurance policy?

This form of life insurance is grouped within term life insurance coverage. Being a part of term coverage means your policy is active for a set amount of time, typically 10, 20 or 30-years. During these “term periods,” your selected beneficiaries are completely covered if anything happens to you.

Like any other term insurance plan, an increasing term life insurance policy has a death benefit that pays out to your beneficiaries when you pass away. Your beneficiaries can use this death benefit in any way they wish, including covering mortgage payments, daily living expenses, and your final expenses and other debts.

What truly separates increasing term life insurance plans from their traditional term life insurance counterparts is their benefit grows over time. With traditional term coverage, you apply for level protection, which means you always know how much your premiums are, and your benefit amount stays the same. With an increasing term plan, your benefit grows over the years, providing you with more coverage annually to help with life changes or inflation. Your premiums can also increase to match this regular increase in benefit amounts.

How do increasing term life insurance policies work?

Like most term life insurance plans, applying for an increasing term policy is carried out the same way. You apply with a life insurance provider and provide basic information like smoking status, sex at birth, and age to help determine your premium amounts. You may also have to undergo medical exams or answer a health questionnaire to determine your eligibility.

With an increasing term life insurance plan, your insurer will also provide you with an amount for how much your benefit will increase either each year or every period of years. This number typically comes in the form of a percentage or a dollar amount.

Let’s take a look at an example of how these benefit amounts can increase. If you purchase a plan for $300,000 in coverage and have a 5% increasing term, in five years, your coverage will be $375,000. With a 5% increase each year, your benefit amount will grow by $15,000 a year.

Some insurers may also have limits that lay out how much your plan can grow up to. For example, you can get a $400,000 benefit with a 5% increasing term, but once you hit $1,000,000, your benefit would no longer increase. When you apply, it is best to find out what limits are in place for an increasing term life insurance policy.

The benefits of increasing term life insurance policies

If you have growing expenses like a bigger family or need more space and have to upgrade your home, an increasing term life insurance plan can benefit you. 

Here are some of the key benefits to this form of coverage:

• No constant underwriting. When your benefit amount increases each year or every period of years, you do not have to undergo more underwriting. Since your increasing terms are agreed upon at the time of your application, you don’t need to worry about doctor visits to see if you qualify for your benefit amount to increase.

• Coverage that grows with you. As we mentioned above, increasing term life insurance benefits consistently grows as time goes on. So, if your life is changing and you need more coverage, an increasing term plan is ideal. You never know what life has in store for you; it is best to have the right amount of coverage at the right time.

• More affordable than a permanent plan. Increasing term life insurance is one of the cheaper policies on the market. Even with its increasing benefit amounts and potential for increasing premiums, it can be more affordable than a permanent whole life option.

• Effective inflation protection. As time goes on, costs constantly go up. If you have a level term life insurance plan, the amount you applied for ten years ago may not be enough for your current needs and to cover inflation. An increasing term plan provides you with steady increases to ensure you have the coverage you need no matter what. 

Extra features of increasing term life insurance policies

There are some additional features that you can add to both increasing and traditional term life coverage plans. 

Life insurance riders

You may have the option to add a “rider” to your increasing term life insurance coverage. A rider is additional coverage added to a life insurance plan at the time of the initial application. These can come at an extra cost, but they can maximize your coverage and allow you to customize your plan.

Typical life insurance riders include:

• Accidental death rider - offers additional coverage if your death is the result of an accident. 
• Waiver of premium rider - provides the ability to waive future premiums if the insured becomes permanently disabled.
• Child rider - additional coverage that provides a death benefit if a child passes away before a certain age.
• Accelerated death benefit rider - allows the insured to access their death benefit if they are diagnosed with a terminal illness.

Converting to permanent coverage

Most term life insurance plans come with the ability to convert your coverage to a permanent life insurance plan. This option typically becomes available when a term period comes to an end. At this point, you have the opportunity to continue with more temporary coverage or convert to a permanent plan.

Increasing term life insurance FAQ

Is an increasing term life insurance right for me?

An increasing term life plan can be beneficial if you are concerned about your expenses outweighing your life insurance coverage. With the consistent increase to your benefit amount with increasing term coverage, you can always ensure that your coverage meets your financial needs. 

Regular term or increasing term? What makes them different?

The death benefit is the key difference between the two forms of temporary life insurance coverage. With traditional term life insurance, your coverage amount remains the same for the entire term period. Increasing term, as the name suggests, provides you with steady increases to your benefit amount. So, your coverage is continuously increasing as time goes on.

Can I have multiple increasing term life insurance plans?

You can have multiple policies active at one time. But you need to be aware that owning multiple plans means having to pay multiple premiums. If you’re buying the plans at different stages of your life, there will likely be an extensive range between the two sets of premiums you are paying. You will also have to keep on top of different paperwork and premium payment dates.

Visit our Term Life Insurance Q&A page for more questions and answers regarding term life coverage and how it works.

Termforme.com Traditional Term Options

For more information about our temporary life insurance plans, you can visit our product pages. We offer 10-year term life insurance, 20-year term life insurance, and 30-year term life insurance plans, each of which offers up to $750,000 in coverage with guaranteed premiums.

For a free no-obligation quote and a list of tailored plan options, please complete our short free quote form now!

Written by: Adam Bianco