Life Insurance Basics

What Does Increasing Life Insurance Mean?

Increasing life insurance in Nigeria is a policy where the payout amount rises over time, specifically designed to grow in line with inflation and protect your family’s future. Also known as increasing term life insurance, it is a dynamic financial tool where the sum assured grows by a predetermined rate each year. This ensures the money you leave behind keeps its value, unlike a standard policy that pays a fixed amount.

For many Nigerians, a major worry is that the N10 million cover bought today might lose its purchasing power in 20 years. This policy addresses that by automatically boosting your cover annually, ensuring your loved ones are adequately protected no matter what.

This article explains exactly what increasing life insurance means, how it works, and whether it’s right for you.

What Does Increasing Life Insurance Mean?

Increasing life insurance simply means your life cover grows each year without you needing to apply for a new policy or undergo fresh medical checks. It provides a death benefit that rises over time, either by a set percentage (e.g., 5% annually) or in line with an economic measure like the Nigerian inflation rate.

Think of it this way: You buy a policy with a N20 million sum assured. With an increasing option, that N20 million could grow to N21 million next year, N22.05 million the year after, and so on.

This ensures that when your family eventually needs the money, it can still cover major expenses like school fees, housing, or business capital.

How Does Increasing Life Insurance Work in Nigeria?

In Nigeria, an increasing life insurance policy works on a straightforward principle: it pays out a sum that grows each year, and your premium is adjusted accordingly.

Here is a simple breakdown:

Initial Cover: You start with a base sum assured, for example, N15 million with a provider like Leadway Assurance or AIICO Insurance.
Annual Increase: Each year, on the policy anniversary, your cover increases. This could be a fixed rate (e.g., 3% or 5%) or linked to the Inflation Index published by the National Bureau of Statistics (NBS).
Premium Adjustment: Because your coverage is growing, your premium also increases. While life insurance premiums increase due to age-related risk when you first buy a policy, with this cover, they also rise predictably during the term to reflect the growing death benefit.

This structure provides a powerful hedge against inflation, making it a popular choice for young families and professionals.

Is Increasing Life Insurance a Good Idea for You?

Deciding if increasing life insurance is a good idea depends on your financial goals. It is an excellent choice for Nigerians who want to ensure their policy’s future value isn’t eroded by inflation.

You should consider an increasing term life policy if:

You are young and have a growing family: Your financial responsibilities will likely increase over the years. This policy grows with you.
You want to cover long-term goals: If the payout is for a child’s university education in 15 years, you need the fund to match future costs.
You are the primary breadwinner: You want peace of mind knowing your family’s lifestyle will be maintained, even with rising costs.
You want to lock in your insurability: Your cover grows automatically without new medical exams.

However, it might not be suitable if you are on a very tight budget and cannot accommodate the scheduled premium increases.

What Is the Difference Between Level and Increasing Life Insurance?

The main difference between level and increasing life insurance is how the death benefit is treated. A level term policy has a fixed payout, whereas an increasing term policy increases payout with inflation.

Feature	Level Life Insurance	Increasing Life Insurance
Death Benefit	Stays the same throughout the policy term.	The death benefit rises over time.
Premiums	They are fixed and do not change.	Increase gradually over the policy term.
Best For	Covering fixed debts like a mortgage.	Protecting against inflation and rising living costs.
Example Provider	Standard term policies from AXA Mansard.	Policies with an “inflation-proofing” or “increasing” rider.

For instance, a Lagos-based software developer with a fixed mortgage might choose a level term policy. In contrast, an Abuja-based entrepreneur with young children might opt for an increasing policy to secure their family’s future lifestyle.

Pros and Cons of Increasing Life Insurance in Nigeria

Like any financial product, this type of policy has its advantages and disadvantages.

Pros:

Inflation Protection: This is its biggest benefit. It ensures the payout your family receives is meaningful and impactful.
No New Medical Exams: Your cover increases automatically, regardless of any future health issues.
Peace of Mind: It offers confidence that your long-term financial planning is secure.
Matches Growing Income: The policy can be structured to align with your expected salary increases over your career.

Cons:

Higher Premiums Over Time: While the initial cost is often comparable to level term, the premiums will rise annually.
Potentially More Expensive Overall: Over the entire term, you will pay more in premiums than you would for a level term policy.
Increase Caps: Some policies may have a cap on how much the sum assured can grow.

How to Choose the Best Increasing Life Insurance Plan

When choosing a plan in Nigeria, it’s important to look beyond the initial quote.

Check the Rate of Increase: Does it increase by a fixed percentage or is it linked to inflation? An inflation-linked option provides more realistic protection.
Understand the Premium Structure: Ask for a clear illustration of how your premiums will increase over the next 5, 10, and 20 years.
Compare Reputable Insurers: Get quotes from trusted Nigerian insurance companies like Custodian and Allied, FBNInsurance, and others. Compare their terms and conditions.
Read the Policy Document: Pay close attention to any caps or limits on the increase.

A qualified financial advisor can help you compare options and find a policy that fits your budget and future goals.

Conclusion

Increasing life insurance is a smart financial tool for forward-thinking Nigerians. It directly tackles the problem of inflation, ensuring that the legacy you plan to leave behind is not diminished by the rising cost of living.

While the premiums do grow over time, the value it provides in securing your family’s financial future is often well worth the investment. By understanding how it works and comparing your options, you can choose a policy that grows with you and offers true peace of mind.