Increasing term life insurance

As the name suggests, increasing term life insurance is a policy type that increases in value over time. 

But how much does it increase by and how does it work? 

Increasing term life insurance isn’t available through Confused.com, but hopefully this guide can give you some useful information on this policy type. 

What is increasing term life insurance and is it worth it?

Increasing term life insurance is a form of term life insurance. You’ll be covered for an agreed amount of time, and your loved ones get a pay out if you die during this time. 

Unlike other forms of term life insurance, your cover amount increases throughout the policy term. 

The benefit of this is that it helps to protect the pay out from inflation. 

For example, as the cost of living increases, if you took out level term life insurance (where your cover amount remains the same) it might not buy your loved ones as much at the time of paying out. 

The downside to increasing term life insurance is that as your cover amount increases, so does the price you pay. 

Whether it’s worth it would be down to what you want to cover. If protecting your loved ones from inflation is a key priority, it could be a good option.

How does an increasing term life insurance policy work?

When you buy increasing term life insurance, it typically increases each year by a certain percentage. 

Most insurers increase in line with Retail Prices Index (RPI), which is the UK measure of inflation. It reflects the change in price of goods and services bought by households. 

The price that you pay for your policy also increases according to your new cover amount (often up to a maximum of 15%). 

You have the option to choose whether you want to accept the change in cover amount and premium each year. If you choose not to accept the changes, your cover amount and premium price stays the same.

Increasing term life insurance example:

• Current RPI percentage: 4.3%
• Example cover amount: £100,000

Based on the current RPI percentage a cover amount of £100,000 could increase to £104,300 after an annual increase. 

What can increasing term life insurance help to cover?

As your cover amount increases, it could be particularly helpful in covering costs that are likely to increase overtime, such as:

Funeral costs: The price of a funeral is now £4,285—that's a 134% rise since 2004. This could increase further, possibly reaching £5,185 in 2029. 

Daily living costs: The cost of living in the UK has risen in recent years. For example, food prices have increased by 40% since 2020. If prices continue to rise, a fixed pay out wouldn’t cover as much for your loved ones in the future.

Bills and utilities: It’s estimated that average annual electricity bills could reach £3,162 in 2032. This is a staggering increase from £707 in 2020. 

House prices: The average house price in the UK is £268,000 as of May 2025, this is an increase of 1.4% or £3,690 over the last year. If you wanted your pay out to help a loved one get on the property ladder, providing a little extra could help them to do so. 

Need help working out what you’d like to cover? Why not use our life insurance calculator?

How much is increasing term life insurance?

The price you pay for increasing term life insurance depends on your personal circumstances.

Insurers ask for certain information during the application process and they’ll use this information to work out how much you’ll pay:

This information includes:

• Age 
• Smoking (and vaping) habits 
• Lifestyle choices
• Medical history 
• Occupation 
• Length of cover 
• Amount of cover 

It’s important to be aware that when you buy increasing term life insurance, if you accept the increase each year, your life insurance price will also go up.

The good news is that you won't have to provide updated information each year. Your new premium price will just be based on your increased cover amount.

If you’re considering increasing term life insurance it’s wise to assess your budget to establish if you could afford higher premiums each year. If you fall back on your payments, your cover will become invalid, meaning a pay out won’t be made when the time comes. 

What’s the difference between increasing vs decreasing term life insurance?

The difference is that with increasing term life insurance your pay out amount increases, whereas with decreasing term life insurance it decreases. 

Both options last for an agreed amount of time (the term) and pay out if you die during this time.

Is increasing term life insurance a good option for seniors?

It depends on your personal circumstances and what you want to protect. 

It would be important to make sure you had enough budget to accommodate the price increase in your premium each year. 

It’s also important to know that this type of cover only protects you for a certain amount of time. Your life insurance would also need to end by age 80 - 90 (meaning you could outlive the term). 

Life assurance policies (whole of life insurance or over 50s plans) are typically more popular with people in their senior years. This is because the insurance lasts for the rest of your life and a pay out is guaranteed when you die (not if you die). 

Some insurers offer whole of life insurance with an increasing benefit, meaning you could buy life long cover that protects your family from inflation. Your premiums would also increase with this option. 

What are the disadvantages of increasing term life insurance?

The main disadvantage of increasing term life insurance is that the price you pay for your policy will increase each year. 

If you bought a policy with a long term length (for example, 40 or 50 years), the price you pay could become expensive. 

It’s also possible to outlive the policy term. If this happens, your policy expires and no pay out is made. 

Below is a full list of pros and cons: