Term insurance has gained popularity, as it is an affordable way to avail of a higher sum assured (SA)). Several insurers advertise INR 1 crore term plans at reasonable premiums, which have also gained significant popularity.
What is an INR 1 Crore Term Plan?
A term plan is the best way to financially protect your family in your sudden absence. An INR 1 crore plan pays this amount to your nominees if an unfortunate event occurs during the policy duration. The nominees can use this money to pay for regular expenses and achieve future monetary goals.
Life insurance works as an income replacement tool with the objective of ensuring that your family members can sustain their current lifestyle even in your sudden absence. It is commonly believed that an INR 1 crore term insurance plan is sufficient. Although INR 1 crore may seem like a huge sum, the SA depends on several factors, such as:
Daily Household Costs
You must consider the day-to-day expenses incurred to run your home. Some of these include groceries, utility bills, school and college fees, and related costs. Based on the costs and the remaining number of working years, it is recommended to avail of an SA, which is between 15 to 20 times the expenses. An important thing to consider while determining the SA is the future increase in the expenses due to inflation. Additionally, the number of dependents requiring financial stability affects the SA.
Present and Future Income
If you are the sole earning member of the family, the policy benefits must be adequate to substitute the source of income. Consider your current income and future growth and the present lifestyle of your loved ones to determine an adequate SA.
Current Assets, Liabilities, and Outstanding Debts
It is suggested to list down all your assets, such as property, investments like shares, mutual funds, and fixed deposits, and your savings. Similarly, make a list of all your current liabilities including outstanding debts like home, car, or personal loan. Based on the gap between your assets and liabilities, you can calculate the SA for the term insurance plan.
Another factor you should consider is any one-time cost like children’s wedding or home deposit. You will need to ensure that your family is able to meet these future financial goals from the policy benefits and not face any liquidity crisis while fulfilling these financial obligations.
Retirement Corpus for your Spouse and Other Dependents
If your spouse is financially dependent on you and does not earn, you will have to consider a retirement corpus for them. You should also take into account the amount needed by your dependent parents and children in your sudden absence. Providing adequate online term insurance ensures they are able to maintain their present lifestyle even when they are older.
It is essential that you select a large sum assured for your family’s financial stability. In addition, opting for the right tenure is critical. The number of working years and your income are factors that will affect the term insurance period. Generally, the premium is higher when you opt for a longer policy duration. It is advisable to check if there are any term insurance age limits before buying the policy.
Most term insurers offer additional coverage through riders for an extra premium. Some of these include critical illness, accidental disability or death, and waiver of premium, among others. You can add these riders as per your family’s requirements. A critical illness or an accidental injury can result in your inability to continue working, and an online term insurance plan with these riders can prove helpful to provide income during such times.
To summarize, the term insurance SA should be an amount when invested in conservative instruments will provide enough income to ensure that your family can meet their future financial requirements without any difficulties.