A guide to increasing term life insurance

Learn more about how increasing term life insurance works and how it differs from other types of life cover.

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What is increasing term life insurance?

A life insurance policy of any kind is designed to pay out an amount of money upon the death of the policy holder. The size of the payout, however, depends on the type of policy (as well as the unique circumstances of the policy holder).

As the name suggests, with traditional increasing term life cover amount insured increases each year by a fixed amount for the length of the policy. Many people who opt for increasing term insurance choose to do so because it is designed to protect your policy's value against inflation (the rising cost of living).

 This could be an advantage if you’re looking to:

  • Help to maintain your loved ones’ living standards
  • Pay your children’s school or university fees
  • Continue to make mortgage payments

How does increasing term life insurance work?

If someone took out a life insurance policy that offered a payout of £100,000 today, the effect of inflation may diminish the relative value of that sum over time. Its numerical value would still be £100,000, however the purchasing power of the same amount may gradually diminish.

An increasing term life policy takes changes to inflation into account, meaning that your payout amount rises alongside the inflation rate.

With small sums of money and over brief periods of time, you might not notice the effect of inflation. However, with large sums of money and over periods with lengths as long as life insurance policies often are, the effect can be considerable.

Insurers will periodically raise premiums to meet the increased payouts. How they do this will vary by provider, however it is usually an annual increase.

To see the effect of inflation for yourself, use the Bank of England’s inflation calculator. This tool won’t predict the future rate of inflation, however you can judge whether it is something you need to take into consideration when forward planning by looking at historic figures.

Why should I get increasing term cover?

If you are thinking of taking out a long term policy with a large payout you are most likely to be affected by inflation. If this is the type of policy you want, you might want to consider increasing term life cover.

It might be important to protect the size of your payout - whether that's debt repayment or a substantial purchase. Increasing cover can help to protect a payout from the long-term effects of inflation, which can provide peace of mind for this situation.

It’s important to assess your needs when considering any life insurance policy. Much of the decision will depend on what you intend your life insurance payout to cover. Typically, increasing term life policies are used to leave lump sum for loved ones that adjusts and protects against the rising cost of living by increasing by a fixed rate each year. This could to help pay off an interest-only mortgage, give the kids a chance to get their foot on the property ladder, pay towards educational costs or simply to contribute towards living expenses when you're no longer around.

If you have a sizeable estate and know that you are liable to pay a large amount of inheritance tax, you might consider increasing term life cover to help offset this bill.

There are also costs associated with your death that you might not have considered, for instance your funeral, or professional executors of your will if you do not wish to appoint your own. This sort of situation may require a more flexible payout which is the case with increasing term insurance.

Whatever your reasons for leaving a legacy behind, making provisions early can help to give peace of to you and the ones you love.

Post Office Increasing Term Life Insurance

What's it for? Providing for your loved ones and reducing the impact of inflation on the money you leave if you die
Fixed cash sum pay-out? No, the pay-out will increase automatically each year in line with Retail Price Index (RPI) up to a maximum annual increase of 10%
What's the maximum pay-out? Up to £750,000** (depending on age)
Age limit Ages 18-70
Is terminal illness cover included?
Are health-related question asked?
Can I add critical Illness cover and children's cover to my policy?
  • (additional cost will be applicable)
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What type of life cover do I need?

If you're not quite sure if increasing term life cover is right for you, Post Office offers a number of other life insurance options available to suit you.

Decreasing term life cover

You might decide that you are only concerned about paying off your repayment mortgage, or other scheduled payment loan or debt. If this is the case, take a look at decreasing term life cover, where the payout decreases over time in line with your debt.

Level term life cover

If you simply want your loved ones to have money to do with what they wish after you’ve gone or cover the costs of your funeral, a level term policy may be a good choice for you.

Level cover may also be an option if you wish to cover an interest-only mortgage.

Over 50s life cover

If you are between 50 and 80, then you are also eligible for Over 50s Life Cover. This is whole-life cover (as opposed to term cover, which is in place for a specific amount of time). The size of potential payouts is significantly smaller than with term policies and therefore not designed to be put towards a mortgage or other sizeable debt.

It can, however, be used to help pay for a funeral or leave a gift for your nearest and dearest once you depart.

Leaving your loved ones with a legacy can bring peace of mind today, so find out which life insurance is right for you

Other considerations

As increasing term life insurance potentially offers the largest payout of term policies, it is probable that your monthly premiums will be higher than for decreasing and level term insurance. Unlike other forms of insurance whereby the premiums remain the same each month, increasing term cover premiums usually increase periodically.

Still have questions?

You can find more life insurance articles at Post Office My Family.

Ways to get covered

Post Office Life Insurance

Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

Find out more

Post Office Over 50s Life Insurance

If you're aged between 50 and 80 Post Office could help you to leave your family the gift of a cash sum or help towards your funeral costs

Find out more


Optional extras with your Post Office Life Insurance

Post Office Children's Cover

Get extra cover for your little ones and financial peace of mind that your children are covered, by adding the optional children's cover to your Post Office Life Insurance.

Find out more

Post Office Critical Illness Cover

Get extra protection and financial peace of mind by adding the optional critical illness cover to your Post Office Life Insurance.

Find out more

Things you need to know

** Your cash sum is dependent on your age, smoker status, length and type of cover and your personal circumstances at the time you apply.

Post Office Life Insurance offers up to £750,000 cover, depending on your age, for customers who are UK residents aged 18-70 at the start of the policy. The minimum term is 5 years and cover must end before your 90th birthday.

We won’t pay a claim on death if it was as a result of suicide or intentional self-inflicted injury within 12 months of the start date of your policy.

Critical Illness Cover can pay an extra cash sum if you are diagnosed, during the term of your policy, with one of the four critical illnesses covered that meets our definition.

We won’t pay a claim on terminal illness if you don’t meet our definition of terminal illness; or terminal illness is caused by intentional self-inflicted injury within 12 months of the start date of your policy. The full definition of terminal illness can be found in the Terms and Conditions.

We won’t pay a claim if you don’t keep your payments up to date as you will no longer be covered under the policy. If you don’t tell us something or give us incorrect answers to our application questions that affects your cover, we may reduce the amount we pay for a claim or at worst cancel your cover and not refund your monthly payments. If you’re a UK resident aged between 18 and 70, you can apply for cover. Please see Terms and Conditions for further details about the restrictions that apply.  

Post Office Life Insurance is underwritten and administered by Scottish Friendly Assurance Society Limited. Neilson Financial Services Limited assist in the administration. If you buy Post Office Life Insurance over the telephone, it is arranged and sold by Post Office Limited and Post Office Management Services Limited. If you buy Post Office Life Insurance online, it is arranged and sold by Neilson Financial Services Limited, following an introduction by Post Office Limited.

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