Index Linked Life Insurance is designed to provide an amount of lump sum life insurance where the amount that would be paid out on death (or critical illness) rises each year prior to a claim, usually in line with either National Average Earnings or with the Retail Prices Index.
Sometimes the insurer will allow the policyholder to choose a fixed percentage increase at outset as an alternative.The initial premium and the method of increase are determined at outset.
This can be guaranteed so the premium increase to pay for the increased cover is proportionate to the increase in the sum assured. (e.g. If the sum assured rises by 5% then the premium rises by 5%.)