What is increasing term life insurance?

Increasing term life insurance is an uncommon type of term life insurance with a payout amount that increases over time. It can be used to protect against inflation or future cost increases.

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Rebecca ShoenthalEditor & Licensed Life Insurance ExpertRebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.&Tory CrowleyAssociate Editor & Licensed Life Insurance AgentTory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Edited by

Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio is a former associate content director who helped lead our life insurance and annuities editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Reviewed by

Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|4 min read

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Increasing term life insurance has a death benefit that increases over time. This type of term life insurance policy can have fixed or varying costs, depending on the insurer. It’s best for people who want to hedge against inflation or know they want increased coverage in the future. 

However, the cost of increasing term life insurance rarely makes sense compared to other options. If you think you might need to increase your death benefit amount in the future, it’s worth considering using a rider to add more coverage to your existing policy, or getting a supplemental level term life insurance policy instead. 

Learn more about having multiple life insurance policies

Key takeaways

  • Increasing term life insurance is more expensive and complicated than comparable level term life insurance policies.

  • If you want to increase the amount of life insurance you have, your best option is usually to apply for a separate life insurance policy.

  • If your term policy ends, you can often use riders to extend your coverage with a rider.

What is an increasing term life insurance policy?

Increasing term life insurance is a type of term plan in which the payout of the policy increases each year by a predetermined amount. It’s different from simply increasing your total existing coverage amount by adding another policy or a rider.

Your premiums can sometimes fluctuate throughout the term, depending on your specific policy. To account for a larger death benefit over time, premiums for increasing term policies are higher than they’d be for a level term policy.

Learn more about the cost of life insurance

Advantages & disadvantages of increasing term life insurance

Increasing term insurance is more expensive than level term insurance because of the potential for a larger death benefit later in the term.

Policygenius experts recommend purchasing a traditional life insurance policy with a guaranteed death benefit amount instead because it provides more value for the cost. 

Consider the pros and cons of an increasing term policy before pursuing this option.

Pros of increasing term insurance

  • Protection against inflation

  • Potential for coverage without additional underwriting

  • Covers future expenses, such as buying a home or having children

Cons of increasing term insurance

  • Higher initial premiums for less initial protection

  • Maximum limits can prevent larger death benefit payouts

  • Premiums can fluctuate

  • Difficult to find a policy in the U.S. with major insurers

Increasing term life insurance: percentage vs. flat rate

The death benefit grows either by a percentage or flat rate when you have an increasing term life insurance policy.

Increasing term life insurance by percentage

Below is an example of how the death benefit grows by a percentage over time for a 20-year increasing term life insurance policy.

Death benefit at time of purchase

Percentage increasing

Death benefit at end of term

$100,000

5%

$252,695

Increasing term life insurance by flat rate 

Below is an example of how the death benefit grows by a flat rate over time for a 20-year increasing term life insurance policy.

Death benefit at time of purchase

Flat rate increase

Death benefit at end of term

$100,000

$25,000 every 5 years

$200,000

It’s important to review your increasing term life insurance policy (or any policy) with your agent or broker before signing to make sure you understand how your policy works.

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Getting a supplemental life insurance policy

The simplest and cheapest way to increase the total amount of life insurance coverage you have is to get an additional life insurance policy. Setting up multiple life insurance policies is called laddering

Laddering allows you to keep the life insurance you currently have, but add other policies to provide the financial protection you’ll need at various times in your life. 

How to save money by laddering life insurance policies 

Using riders to increase your life insurance coverage

Most term life insurance policies and some permanent policies allow you to incorporate riders — optional add-ons that can extend your coverage and add flexibility to the terms and conditions.

If your goal is to have a flexible policy that allows you to add more coverage over time, there are other options you can consider instead of purchasing an increasing term life policy. These include a term conversion insurance rider and guaranteed insurability rider.

1. Term conversion insurance rider

If you’re approaching the end of your term and still need life insurance coverage, a term conversion rider allows you to convert a term life insurance policy into a permanent or whole life insurance policy.

You still have to pay more if you want more coverage, but this rider can help you avoid additional price increases due to your advanced age or new health issues because it doesn’t require a new medical exam. It can be a cost-effective alternative to re-applying for a brand new policy.

Learn more about the differences between term and permanent life insurance

2. Guaranteed insurability rider

If you have a permanent life insurance policy, you may be able to add a guaranteed insurability rider. This policy add-on allows you to increase the death benefit after major life events, like getting married or having a baby. 

With many of the same benefits of increasing term life insurance, a guaranteed insurability rider is useful if you anticipate needing more coverage as you get older.

This rider won’t be cheap, and neither will the permanent life insurance policy that it pairs with. But, like a term conversion rider, it allows you to skip the medical exam if you need more coverage later on. 

Learn more about the differences between term life and permanent life insurance

The bottom line

Increasing term life insurance can protect against inflation and help those with family or assets that will grow drastically over time. However, this specific term life policy comes with high premium costs and a complicated death benefit structure. For most people, laddering multiple life insurance policies or using a rider are better options to consider if you need to increase your coverage. 

Policygenius doesn’t currently offer any increasing term life insurance, but our experts are happy to walk through our other term life insurance products to help find the best fit, no matter what.

Other types of term life insurance

Authors

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Tory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Editor

Antonio is a former associate content director who helped lead our life insurance and annuities editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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