What is increasing term life insurance?

Increasing term life insurance allows your sum assured (cover amount) to increase each year to protect your pay out amount from inflation.

But how does this type of policy work and will your premiums increase too?

Please note, Reassured doesn't sell increasing life insurance policies. However, we can arrange level and decreasing life insurance. Below we evaluate the merits of increasing life insurance cover, so you can determine what type of cover is right for you.

Keep reading to find out everything you need to know about increasing your life insurance cover...

How does increasing term life insurance work?

With an increasing term life insurance policy, your cover amount will increase by a certain percentage each year, (in line with the Retail Prices Index).

For example, with Legal & General Increasing Cover your sum assured can have a maximum increase of 10% each year[1].

To reflect your new cover amount, your premiums will also increase each year, (up to 15%).

If you choose to not accept the increase, your premiums and cover amount will remain the same.

As with any term life insurance policy, you’ll be covered for a specified period of time and a pay out will only be made to your loved ones if you pass away during this time.

How can I increase my life insurance?

It’s hard to know what life has in store for you and you may need more cover than you originally planned.

You may need to increase your cover due to a change in circumstances, these can include:

Thankfully there are a few options that will allow you to increase your sum assured, including:

  1. Increasing term life insurance
  2. Guaranteed insurability option

By taking out increasing term life insurance your pay out will be protected from inflation and will increase over time, (usually each year).

Guaranteed insurability is an option that lets you increase your sum assured during the term of your policy.

This is also known as the ‘life changes option’ as you can increase your cover to help meet new circumstances in life.

Increasing life insurance vs guaranteed insurability option

As discussed, increasing life insurance is a policy type that will allow your sum assured to increase over time, this is to help protect your pay out amount from inflation.

This can be a good option for those who need a minimal amount of cover at a young age but may need more cover as they go through life.

The guaranteed insurability option (GIO) is a benefit that may be included in some life insurance policies.

It allows you to increase your sum assured should your circumstances change and you require more cover. Premiums will also increase as a result.

Each insurer will have a list of life events where GIO can be used. This list can be found in the terms and conditions of your policy. Often it includes:

  • Birth of a child
  • Marriage or civil partnership
  • Increase in mortgage / rental increase
  • Change of employer

You won’t be required to provide any further medical information.

Increasing life insurance Guaranteed insurability option
A life insurance policy An option included with some life insurance policies
This policy option must be chosen from the start Can use this option anytime during the term of your policy (subject to one of the qualifying life events taking place)
Sum assured will automatically increase each year in line with RPI This option can be used to secure more cover without the need to provide new medical information
Premiums will also increase as a result Premiums will increase in line with new cover amount
Designed to protect sum assured from inflation  Designed to ensure sum assured meets your needs

Increasing vs decreasing term life insurance

Increasing and decreasing are both forms of term life insurance.

This means your cover will last for a specified period of time (the term) and a pay out will only be made if you pass away during this term.

However, with increasing term life insurance your sum assured will increase throughout the lifetime of your policy, (typically each year).

Whereas with decreasing term life insurance, your sum assured will reduce over time.

Increasing term Decreasing term
Sum assured increases throughout policy Sum assured decreases throughout policy
Premiums will increase each year Premiums remain the same
Increase in sum assured protects against inflation Sum assured not protected from inflation
Can help cover rising living costs and large debts, such as a mortgage Can help cover a mortgage or other large debts that reduce over time
Terminal illness is included Terminal illness is included
Critical illness can be added for an additional cost Critical illness can be added for an additional cost
Can become costly depending on the length of your policy Ideal for those on a budget who want life cover in place


Which option is best for you will largely depend on what it is you want to protect.

For example, if you’re hoping to help protect your loved ones from rising living costs and don’t want your pay out to be affected by inflation you may choose increasing term life insurance.

If you’re looking to help protect a repayment mortgage, decreasing term life insurance is an ideal option.

At Reassured we can compare level and decreasing term quotes from some of the UK's leading insurance companies to find you the right policy at the right price. We can't compare increasing life insurance quotes.

Increasing vs level term life insurance

With level term life insurance, your sum assured remains fixed throughout your policy.

This means no matter when you pass away (during the term) your loved ones will always receive the same amount.

Increasing term life insurance allows your sum assured to increase each year - meaning that the later you pass away into the term, the more your loved ones would receive.

Increasing term Level term
Sum assured increases each year Sum assured remains the same
Premiums also increase each year Premiums remain the same
Increase in sum assured protects pay out amount from inflation Pay out amount isn’t protected from inflation
Only pays out if you pass away during the term Only pays out if you pass away during the term
Can help protect against rising living costs Can help protect a mortgage, family living costs, provide an inheritance etc
Terminal illness is included Terminal illness is included
Critical illness can be added for an additional cost Critical illness can be added for an additional cost
  Guaranteed insurability option may be available on some policies


Although you may be able to receive a large sum assured with increasing term life insurance, you’ll also need to pay increased premiums each year.

An increasing pay out amount may seem tempting at a young age but it’s likely that the older you are, the less cover you require (meaning this cover option could become costly and unnecessary later on in life).

With level term cover everything remains the same, so this may be a more cost-effective option in the long run.

Most insurers also offer the guaranteed insurability option with their level term policies.

This option allows you to secure more cover without the need to provide any new medical information.

At Reassured we can compare multiple level term life insurance policies from some of the UK's best life insurance providers to help you find your ideal policy. We can't compare increasing life insurance cover.

Increasing life insurance premiums

As with other forms of term life insurance, premiums for an increasing term life insurance policy will be calculated using the following information:

These factors will allow insurers to assess the level of risk you pose to them and your premium will be calculated accordingly.

As your sum assured increases each year, your premium will also increase to account for the higher risk to the insurer.

Premiums will increase in line with the Retail Prices Index (RPI), there is typically a maximum increase of 15%.

However, you do have the option to not accept the changes and your premiums and sum assured will remain the same.

Life Insurance Calculator

Calculate how much life insurance you may need by filling in the costs you’d like your policy to cover.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk

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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk

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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk

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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk

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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org

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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk

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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net

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How long should life insurance last?

How long you need your life insurance to last will depend on your own personal needs.

When thinking about your policy length you should consider:

  • The cost of your mortgage
  • How long until your mortgage is paid off
  • How long until you retire
  • Whether you have dependants
  • How long until your dependants are financially independent
  • Rising living costs
  • Rising funeral costs

These factors will give you a rough idea of how long your cover should last.

For example, if looking to help protect your mortgage, the term of your policy will need to be at least as long as your mortgage term.

However, life can be unpredictable and it can be hard to plan for every life event.

If your circumstances change you may need more cover than you originally planned for.

This is where increasing life insurance could be useful as your sum assured increases each year.

Alternatively, most term or whole of life insurance policies include a ‘life changes’ (guaranteed insurability) option – meaning you only increase your cover amount when you need to.

At Reassured we can compare quotes from some of the UK's leading providers for level term, decreasing term and whole of life policies, and inform you on which insurers offer the guaranteed insurability option.

Should I buy extra life insurance?

It’s completely possible to take out more than one life insurance policy.

If later on in life you decide you need extra coverage due to a change of circumstances, depending on your budget you can take out an extra life insurance policy.

Taking out an increasing life insurance policy may eliminate this need as your sum assured will increase each year, meaning the amount paid out becomes greater.

It’s also a good idea to speak with your insurer, as your policy may have a ‘life changes’ (guaranteed insurability) option which will allow you to take out a new policy to increase your level of cover (and you won’t have to provide additional medical information).

Secure the right life cover

Comparing quotes and looking at the different policy options available is essential to securing cover that best meets your needs.

At Reassured unfortunately we can't arrange increasing term life insurance for you. However, we can take you through the whole process of securing level term, decreasing term or whole of life insurance and compare quotes from a range of insurers for these policy types on your behalf - helping save you time and money.

What's more, some policies arranged through Reassured include the guaranteed insurability option as standard, (for those eligible).

Cover arranged through us starts from just 20p-a-day so why not get in touch for your free quotes?

A member of our award-winning team will be happy to help.

Sources:

[1] https://www.legalandgeneral.com/adviser/protection/life-cover/increasing-life-insurance/

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