Term Life Insurance is a straightforward and budget-friendly type of life coverage that lasts for a specific period called “term.” If the person insured unfortunately passes away during this term, it provides financial support to their family, just like the agreement outlines. When figuring out how much life insurance someone needs, several things are looked at, like their age, yearly earnings, debts, where they live, gender, savings, investments, and more. All these factors help in understanding someone’s current and future money goals, which helps figure out the right amount of coverage.
But as time goes on and life changes, our money goals change, too. Plus, prices for things keep going up because of inflation. So, the coverage that feels like enough now might not be later when your family needs it. What can you do in this situation? Do you have to get a whole new term plan whenever your money goals and life change? Well, that’s where an Incremental Term Life Insurance Policy comes in. This post explains in detail about Incremental Term Insurance Plan.
What is an Incremental Term Insurance Plan?
An incremental Term Insurance Plan is a type of term life insurance plan where the coverage amount of the term policy increases annually. As the assured sum grows, the premiums you pay also increase. You have the flexibility to choose the rate at which the coverage amount increases, taking into consideration factors such as your financial goals and the prevailing inflation rate.
These policies can be particularly advantageous because they not only provide financial security for your beneficiaries in the event of your passing but can also adapt to improvements in your financial situation.
Incremental Term Plan Premium Amount
Incremental Term Plans offer an increasing insurance sum, which naturally results in higher premiums compared to basic life insurance plans. These policies come in various forms, allowing you to choose the interest rate structure that suits your preferences. You can opt for a stable interest rate throughout the coverage period or choose to increase it annually. While the latter option may yield higher returns, it’s essential to select a rate that aligns with your long-term financial capabilities.
Pros Of Opting For An Incremental Life Insurance Policy
Choosing an incremental life insurance policy comes with several benefits:
While the initial premium might appear high, these policies provide substantial coverage in return, making them a cost-effective choice for long-term financial planning.
Meets Your Increasing Requirements
With each new stage of life, individuals’ family responsibilities and requirements increase, so they buy term plans as soon as they start working. When you get married and have children, a term plan that you bought while unmarried may not meet the needs of the family. With an Incremental Term Plan, your new family members will be sufficiently covered as the life cover increases.
Over time, inflation erodes the value of money. By increasing the assured sum annually, you can stay ahead of inflation, ensuring that your family receives a sufficient payout even after many years.
These policies offer substantial payouts in the event of your demise. You can choose to receive this amount as a lump sum or in regular intervals, depending on your preferences set at the policy’s outset.
Investing in these policies may grant you tax exemptions under the Indian Income Tax Act. You can benefit from tax relief of up to 1.5 lakhs if you are paying premiums for term insurance policies. Additionally, the policy benefits received by your beneficiaries are generally tax-free as long as they fall below a certain threshold.
By paying a slightly higher premium, you can purchase riders with your Incremental Term Plan. The plan allows you to customise it according to your needs. Depending on your lifestyle, the riders provide comprehensive coverage for specific high-risk areas. Life insurance riders include Accidental Death Benefits, Return of Premium, Waiver of Premium, Critical Illness, Accidental Disability, and others.
Incremental term life insurance policies offer numerous advantages, especially when purchased early in life. However, it’s crucial to carefully consider your income, resources, and future financial goals before investing in these plans. Accurate budgeting is essential to ensure that your financial well-being remains intact and that you are well-prepared to provide for your loved ones in the years to come. A term plan with incremental benefits makes sense if you know your responsibilities will increase as you grow older. If you are looking for term life insurance, make sure it is with a reputable company such as Aditya Birla Life Insurance.