Increasing Term Life Insurance

Increasing term life insurance is a policy where the death payout increases every year the policyholder is alive. Because of the increase in payout, increasing term life insurance rates are more expensive than other term life insurance policies. Customers who want to purchase a term life insurance policy that increases should shop around to find the best deal.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Jul 19, 2021

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Quick Facts

  • Increasing term life insurance is a type of term life insurance where the value of the policy payout increases every year
  • It is more expensive than other term life policies
  • Term life insurance is temporary life insurance, as customers typically purchase 10-, 20-, or 30-year plans

What is an increasing term life insurance policy? One of the various types of term life insurance, increasing term life insurance increases the death payout with each year.

However, term life insurance is a less popular option because of higher prices. If you are thinking about increasing term life insurance or just want to know more, you’ve come to the right place. Read on.

If you want to start comparison shopping for increasing term life insurance, use the free tool above.

Basics of Increasing Term Life Insurance

Looking for increasing term life insurance definition? Unlike whole life insurance, a term life policy is a set period of life insurance coverage. If the carrier of the term life policy dies during the set period, the carrier’s beneficiaries will receive the life insurance payout.

Is five-year increasing term life insurance popular?

Generally, term life insurance can be bought in coverage periods of 10, 20, or 30 years.

So can you increase your term life insurance? Absolutely. With an increasing term life insurance policy, the amount paid to beneficiaries increases every year at a set percentage.

The catch is that premiums are more expensive with increasing term life insurance policies. Because of this, most people choose decereasing term life insurance policies instead, where the payout amount goes down every year but premiums are cheaper.

How is increasing term life insurance normally sold? Ask your insurance agent for the best options.

Is increasing term life insurance a good idea?

Whether increasing life term insurance is a good idea depends on your individual needs. What about increasing vs decreasing term life insurance?

If you think your financial needs will increase over the next few decades, such as sending kids off to college, an increasing term life insurance policy will be better than a decreasing term life insurance policy.

If your financial needs won’t change much over the years, then it may not be worth it to get an increasing term life insurance policy. This is especially true if you will struggle to pay the more expensive increasing term life insurance premium.

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Do term life insurance premiums increase with age?

What’s up with increasing premium term life insurance? It depends on whether you purchase a renewable term life policy or a level term life policy. Do research to get the best increasing premium term life insurance rates.

What do these life insurance terms mean? With a renewable term life policy, your rates may go up at renewal. So why do people choose this option?

A renewable term life insurance policy is ideal if you only need short-term coverage. For example, if your mortgage will be paid off in a few years, you may only want short-term coverage until your finances improve. That way, if you die, the rest of your mortgage will be paid off by the renewable term life policy.

Once your mortgage is paid off, you may no longer need a term life policy and decide to drop it.

Take a look at the table below to see how rates can increase every year with a renewable term life insurance policy.

Average Annual 10-Year Term Life Insurance Rates by Policy Length
Length of Policy in YearsAverage Annual Rates
1-10$500
11$2,500
12$2,800
13$3,400
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On the other hand, a level term life insurance policy is set for a fixed number of years. Because it is not renewable, your rates won’t change every year, but will still be the same as when you purchased the policy.

This is a more popular option, as the Insurance Information Institute (III) found that in 2003, 97 percent of all term life policies purchased were level term life policies.

What happens if I outlive my term life insurance?

Because term life insurance is only for a set amount of time, you are probably wondering what happens once the policy is up. The answer is not much. Your policy will simply end, and you won’t get any benefits unless you sign up for a new policy.

So even if you die the day after your policy ends, your beneficiaries won’t receive anything. Because of this, it is wise to purchase a new term life policy as soon as yours ends.

Do you get your money back at the end of a term life insurance policy? Only if you have purchased a return-of-premium policy. Take a look at the table below to see how much a return-of-premium policy costs in comparison to a regular term life policy.

Return of Premium vs Term Life Insurance Rates
CoverageRate of Premium Life Insurance Average Monthly RatesTerm Life Insurance Average Monthly Rates
$100,000$13/month$10.45/month
$250,000$20/month$15.25/month
$500,000$34/month$23.48/month
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These types of policies are much more expensive than a regular term-life policy, but it does mean you get your money back at the end of the term-life insurance policy.

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Alternatives to Increasing Term Life Insurance

What are some alternatives to an increasing term life insurance policy? There are a number of other types of life insurance polices you can get. Some of them we’ve already mentioned, such as whole life insurance. Take a look at the list below to see what other types are out there.

  • Convertible Term Life Insurance. With this type of term life policy, you can change your term life to whole life insurance at any time.
  • Whole Life Insurance. This type of policy will cover policyholders throughout their lives, as there is no set time period of coverage.
  • Universal Life Insurance. This insurance splits your monthly fees by putting half of it toward life insurance and the other half into investment savings.
  • Variable Life Insurance. Like universal life insurance, variable life insurance puts your money to work in investments and savings. This means your life insurance has a cash value.

We hope our guide to increasing term life insurance helped you. Are you ready to buy increasing term life insurance?

If you want to start shopping for affordable increasing term life insurance, use the tool below to find increasing term life insurance quotes. Which increasing term life insurance company is for you? Find out now.

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