What does increasing term assurance adjust for?

Increasing term assurance is a type of life insurance policy that offers a death benefit which rises over time, typically in line with inflation. This adjustment helps to maintain the purchasing power of the coverage amount as the cost of living increases.

Inflation impacts the value of money, meaning that a fixed sum insured will buy less in the future than it would today. By increasing the sum assured, this form of insurance aims to ensure that the benefit payable at the time of the policyholder's death is sufficient to cover financial obligations or maintain the standard of living for the dependents, despite the impacts of inflation.

The other options, while relevant to financial planning and insurance, do not pertain directly to the specific adjustment that increasing term assurance provides. Market volatility affects investment returns rather than the sum assured in life insurance. Retirement age is a factor influencing when individuals may need to focus on different insurance products, but it does not relate directly to increasing the amount of coverage. Changes in family size might affect the type or amount of insurance needed, but increasing term assurance specifically addresses inflationary concerns.