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Allowing For Inflation
Both family income and lump-sum benefit policies are able to pay out a ‘level’ (fixed) amount: the amount that you were initially insured for will remain the same over the term of the policy, this means that its real value will essentially go down due to inflation issues.
Alternatively, a sure-fire way of guarding yourself against inflation eating away at the amount you are insured for is to choose an ‘escalating’ policy where the amount that you are insured for plus your premiums increase every year – either by a fixed percentage or inline with the Retail Price Index (RPI).
An escalating policy will cost you more than policies that pay a level benefit, but having such a policy is an adept way of making sure the value of your cover is protected, this is an increasingly important factor if you are insuring for more than ten years.
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