Increasing Term Life Insurance
Written by Check Financial · 3 min read
The short answer
Increasing term life insurance pays a lump sum if you die during the policy term, and the amount of cover rises each year. That helps the payout keep its value as prices go up over a long policy.
Who It's For
Increasing term suits people who want long-term cover that doesn't lose value to inflation. It is often worth considering when:
- You're taking out cover for 20 years or more, for example while your children grow up.
- You want the payout to reflect what your family would need in future, not just today.
- You're covering living costs rather than a fixed debt.
How It Works
- You choose a starting amount and a term.
- The cover rises each year, either by a fixed percentage or in line with an inflation measure such as the Retail Prices Index (RPI).
- Your premium rises each year too, usually by more, in percentage terms, than the cover.
- If you die during the term, the insurer pays the amount of cover at that point. Most policies also pay early if you're diagnosed with a terminal illness, though often not in the final 12 to 18 months of the term.
On some policies, if you turn down the yearly increases, you can lose the right to future increases. We'll explain the rules on any policy before you decide.
Increasing cover is available on life insurance and on critical illness cover.
How Much Cover, What It Costs and Tax
How much cover. Work out what your family would need today: debts, income for a number of years, and future costs. The yearly increases then help that amount keep its value. Our guide How much life insurance do I need? walks through it.
What it costs. The price depends mainly on your age, health and smoking status, the starting amount, the length of the policy and how the cover increases. It starts higher than level term for the same amount, and the premium rises every year.
Tax. The payout isn't subject to income tax. It could form part of your estate for inheritance tax unless the policy is written in trust. We'll explain how a trust works when we set up the policy.
What It Doesn't Do
- A fixed yearly increase may not match actual inflation, which can rise faster or slower.
- It isn't designed for a repayment mortgage, where the debt falls over time. That's decreasing term.
- Premiums don't stay the same. You need to be comfortable with them rising every year.
- It doesn't pay anything if you outlive the term, and you can't cash it in.
Real Scenario
Example scenario, not a real client
Cover That Keeps Pace with a Growing Family
A parent in their early 30s wants life cover for the next 25 years, until their children are independent.
Outcome: They choose increasing term so the payout rises each year, keeping it closer to what their family would actually need 10 or 20 years from now.
Common Questions
How much does the cover go up each year?+
Does my premium go up too?+
Can I turn down an increase?+
Is this better than level term?+
Can I add critical illness cover?+
Related Guides
Level Term Life Insurance
Level term life insurance pays a fixed lump sum if you die during the policy term. The amount stays the same throughout, so your family knows exactly what they would receive.
Read guide →How Much Life Insurance Do I Need?
A practical framework for working out the right cover amount for your circumstances.
Read guide →Family Income Benefit
Read guide →This guide is general information, not personal advice. Check Financial Ltd is an appointed representative of Capital Protect Ltd, authorised and regulated by the Financial Conduct Authority.