Insurance bought at a young age will seem inadequate after few years as inflation would have reduced the value of your cover
16-Sep-2013 •Research Desk
Are there any term policies for life and health which increase the sum assured corresponding to inflation every year? It is difficult to increase the fixed sum assured with increase in earnings and inflation.
-J B Jani
Insurance bought at a young age does seem inadequate after you have more responsibilities and a better standard of living. Inflation can eat into your savings and your cover is most likely to be insufficient in future.
Few insurance companies offer policies that increase sum assured annually. Most of these policies offer a 5 or 10 per cent annual increase, till the sum assured is twice the basic amount. Life insurance policies including Aegon Religare Increasing Term Plan, Bajaj Allianz iSecure More Insurance plan, Bajaj Allianz New Risk Care II, IDBI Federal Termsurance Increasing Term Plan and SBI Life Smart Shield Increasing Term Assurance; can increase the sum assured.
These policies charge a higher premium as compared to ordinary term plans. There premium remains same throughout the policy term, and does not increase annually to counteract inflation.
You renew your health insurance policy every year, so no insurer offers to increase the sum insured on an ongoing basis. However your sum insured in a health plan can increase on next renewal if you don’t make a claim in the current term. This is so because continuing with the same policy entitles you to receive loyalty bonus and no-claim bonus. It will increase your sum insured by a specific percentage of basic sum insured. You can also increase the health insurance cover with a top-up plan. A top-up policy works on cost-sharing basis wherein a specific amount can be paid by an existing cover or any other source. This amount is specified at the time of purchase as deductible or threshold limit. Once your medical bills cross this limit, the top-up plan will get activated. Threshold limit will apply afresh every time insured gets hospitalized.
This way, minor hospitalization expenses can be covered by your basic health policy and top-up plan can take care of expenses beyond the reach of existing policy.
We recommend top-up plans for higher health cover because these are cheaper as compared to a basic policy. Apollo Munich Optima Plus, Bajaj Allianz Extra Care, Chola MS Top Up Healthline, Star Health Super Surplus, United India Top Up and United Super Top Up policy are the top up plans available in the market.