What is an Incremental Term Life Insurance Policy?

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Incremental Term Life Insurance Policy in India

When you are buying term insurance it is important to buy a policy that offers you the sum assured that you need to fulfill the financial objectives you have in life.

An incremental term life insurance policy is one where the sum assured amount would increase at a fixed rate after each year thus providing you – the policyholder – with better coverage. The insurers increase said amount after adjusting it with your financial goals at that point in time and the current rate of inflation. Let us say that you bought such a policy with an initial sum assured of one crore rupees.

In an incremental term life insurance policy the insurer would decide the rate at which the increase would happen and then take the necessary step at the end of each year in the policy tenure. Then let us assume that you suddenly die or some other unfortunate event occurred in your life within the policy tenure. In that case, your nominated beneficiaries would receive the sum assured plus the increment that has been accrued on the same. The issue with a normal term policy is that the sum assured amount that it provides may not be sufficient for your family.

If you know what is term life insurance you would know this as well. This is where the incremental policies that we are talking about can be so valuable. The extra money that you get from these policies could help you get the better of inflation.

Benefits of Incremental Term Life Insurance Policies 

These policies offer several benefits that may be enumerated as below:

  • they are economical
  • they help you deal with inflation
  • they help you fulfill various financial goals at different stages of your life
  • the premium rates stay the same throughout the entire tenure
  • they offer you death benefits
  • they offer you various riders
  • they offer you tax benefits

The economical nature is one of the biggest benefits that you can expect from such a life insurance term plan. This is because the premium rates stay the same throughout the total policy period. This means that there is no extra strain being put on your finances. The normal sum assured that a term plan offers may not be sufficient for your family to meet any long-term requirements they may have. With these policies, you would be able to make sure that inflation does not become an issue for your family in the future and in your absence.It does not matter when you buy these policies.

The increasing life cover means that they would always be in alignment with the objectives that you have in life.In some cases, in these policies, the premium rates might increase depending on the terms and conditions of the policy. Please remember that in the initial stages the premium that you pay for these term insurance policies would be higher than that of the later period. In these policies, the death benefit is paid to your family members or anyone else that you may have nominated. As you would have understood already the death benefit that you get in these term insurance plans is a combination of the basic sum assured and the increment that has been accrued on the same.

These policies offer you some of the best riders such as critical illness rider, waiver of premium, and accidental death and disability benefit rider, to name a few. So, this is a major advantage of these policies when you come to think of the same. The premium that you pay for these policies qualifies for tax exemption as per Section 80C of the Income Tax Act, 1961. The death payments in these cases are exempted from taxation as well as per Section 10 (10D) of the ITA (Income Tax Act).

Why should you choose Incremental Term Life Insurance Policies?

We have already made an honest effort to prove why these policies can be called the best term life insurance. You need to consider the fact that inflation is always going up and life – in general – is becoming costlier even as we speak. Indeed, you are earning more with each year as well. Even as time goes by the responsibilities on you are piling up. This includes the likes of the money that you have to spend for your kids, creating assets, and home loans, to name a few. You already know that in the incremental policies the sum assured is always increasing, even if at a specific rate.

This means that even in case something unfortunate were to happen to you during the policy coverage period the money that your family members would receive from an incremental term insurance planwould be quite sufficient as far as meeting their regular expenses are concerned. The money would be rather effective when it comes to dealing with the increasing rates of inflation. You already know that the premium rates in these policies are rather affordable. This means that it would be that much easier to create a secure financial future for people that matter to you.

It can be said for sure that the incremental term insurance policies are ideal for people who still have youth on their side. So, when you start early the life cover also increases accordingly and this helps you keep pace with the responsibilities that you have in life.

Read More: What Is The Maximum Age Limit In Term Life Insurance Policy?

Conclusion

So, as you can see for yourself, these policies do have some unique benefits. So, if you think you would be taking on more responsibilities even as you grow older this is a kind of insurance that you must invest in.

You can be sure that buying such term insurance would be one of the best decisions that you have ever taken. As we have said already, it is better that you buy such a policy as early as you can in life. You can be sure that when you buy such a policy you would have taken the best decision when it comes to securing the financial future of your family.

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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