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Increasing And Term Life Insurance Rises In Price As Well As Coverage

By Mike Heuer

Many people who are young might struggle to make ends meet as they begin their working careers and start to raise a family while also buying a home or paying a vehicle loan or lease. Such financial responsibilities can make it difficult to afford a whole life insurance plan, but an affordable alternative is an increasing term life insurance policy, which provides a set death benefit while charging a premium that gradually rises over time.

Such plans can be good ways to supplement existing whole life plans as well when a higher death benefit might be needed for a short period of time, such as five or 10 years while paying down a home mortgage or putting children through college. And the policies have guaranteed renewal options in most cases or can be converted into whole life insurance plans. Business owners also can use increasing term life plans to help pay the costs if they might die suddenly while a business is first growing to help ensure employees as well as family members might be able to continue the enterprise in the absence of its initial owner or partner.

Many increasing term life plans can be enhanced with optional insurance riders, such as an accidental death benefit rider that pays an additional amount if the named insured is killed by an unfortunate accident, or a living benefit, which will help pay medical costs if the named insured is stricken with a terminal illness while the policy is in effect.

Another optional coverage that might be available is a disability waiver that pays the premium if the named insured suddenly is disabled and cannot work for at least six months. Some increasing term life plans also come with options for a surviving spouse who is a beneficiary to purchase a term life plan with no medical exam required if the initial named insured should die and a death benefit is paid. The named insured is the person whose life is covered by the policy. If he or she dies, his or her spouse suddenly becomes the main earner and would have a greater need for life insurance coverage to protect family assets and financial interests.

While an increasing term life insurance plan can be a good bargain for those just setting out on their careers and starting to raise families, there are some limitations.

Over time, the policies can become very costly when compared to standard level term life plans, which typically have affordable premiums that never change throughout the life of the insurance contract. When buying an increasing term life policy, it might be best to limit the term to no more than 10 years and then either convert to a whole life plan or buy a level term life policy of 20 years or 30 years.

Purchasing a convertible term life plan also might be a good idea. As responsibilities change over the years, there might be a greater need for whole life insurance to create a financial legacy. And with increasing term life plans rising in cost over the years, the eventual move to whole life insurance products might be a good move.