Increasing Term Insurance & Index-Linked Term Insurance

Both Increasing Term and Index-Linked Term Insurance are designed to keep the sum assured at the same real value throughout the insurance term. The sum assured is the amount of money that will be paid to your survivors in the event of your death. Over time, prices tend to increase: this increase is called inflation. Therefore, as time passes the amount of money you require to maintain your current standard of living will also increase. By increasing the sum assured, either in proportion with the rate of inflation based on the UK Retail Price Index or by a fixed amount per annum, you can ensure that the amount of money that you initially agreed would provide for your dependents in the event of your death retains its value and continues to be sufficient.

In exchange for this benefit, your premiums will usually increase over time. However, your premiums are based on your state of health when you took out the insurance policy, and so a subsequent adverse health condition will not further increase your premiums. Increasing term insurance is suitable for a long-term life insurance policy, because the real value of the sum assured is constant, meaning that the real amount for which you are covered remains the same. You may want to consider this type of policy if you wish to increase the level of cover for your dependents at any time, such as when you have another child.