Why Buy 1 Crore Term Insurance Plan?
- Term insurance plan should be bought at the beginning of your career when you're sufficiently young, healthy and unencumbered. Working professionals can invest in a 1 crore term insurance plan in their late twenties or early thirties (25-35 years old) to enjoy low premium rates, which are fixed throughout the term of the policy.
- Persons who are the sole earners in the family can invest in a one 1 crore term plan to ensure that their family is sufficiently secure in case of their absence. They should also explore whether a cover of 1 crore term is the best option or whether they need extra cover.
- Individuals with home loans or education loans must have a term insurance plan as a safety net in case of emergencies. The sum assured can be used to pay off an individual's loans, and the family can be debt-free in case of a contingency.
Let's explore a few examples to understand whether a 1 crore term insurance is the right coverage amount for us.
Amit is a healthy 30-year-old with two children and a home loan. He is thinking of investing in a 1 Crore term insurance plan. Let's see whether this cover amount is sufficient for his family's financial needs.
|Current Family's Expenses (per year)
||Rs. 3 lakhs
|Family’s Expenses for the Next 30 Years (with 8% yearly inflation)
||Rs. 3 Crores
||Rs. 50 lakhs
|Child Future Education
||Rs. 50 lakhs
||Rs. 4 Crores (Rs. 3 Crores + Rs. 50 lakhs + Rs. 50 lakhs)
|Personal Savings PF+ Mutual funds
||Rs. 50 lakhs
|Required Life Insurance Cover
||Rs. 4 Crores – Rs. 50 lakhs = Rs. 3.5 Crores
So, a 1 Crore term insurance plan can fall short of up to ₹2.5 Crores for Amit's family in case of an emergency, and he would need to look for a term insurance plan with a bigger sum assured.
Now, let's take the case of Tanmay- a young, healthy, single 25-year-old man who invests in a 1cr Term Plan.
||Rs. 6 lakhs
||Rs. 4 lakhs
|Child Education Expenses
|Current Term Insurance Cover
||Rs. 1 Crore
||Nil ( at present)
|Personal Savings + Mutual funds
||Rs. 2 lakhs
Although he doesn't need a term insurance plan according to the calculations, Tanmay is wise to invest in a term plan early on to enjoy a low premium and high cover, to prepare in case of an emergency. As he moves ahead in life, he can review his policy and expand the plan to include his wife and children.
As you can see, although 1cr sounds like a sufficient number for contingencies, it is subjective whether the cover amount would be sufficient for all. However, for young people, this is a secure investment to reap the best benefits at a later time.
Higher Coverage at Lower Premium Prices
Term insurance plans are the cheapest life insurance policies because there is only a single death benefit and no other savings component. Many people outlive the term of their policy which reduces the burden of claims on insurers. Hence, even a 1 crore term insurance plan can be afforded for as less as ₹422 per month!
Secure Your Family from Debts, Loans and Liabilities
Having a term insurance plan makes it easier to get a loan as in case of an emergency, the payout from a term plan can help repay the loan and keep your family free from the burden of debt, in case you're not around.
By investing in a 1 crore investment plans at an early age, you can save more for your life cover at a cheaper premium price than investing at a later stage. Moreover, you are able to save more on your taxes.
Get Enhanced Coverage
A 1 crore term investment plan offers the policyholder enhanced coverage from financial constraints. This ensures that the policyholder and his family are financially secure and are able to lead on with their lives without any hassle.
Whole Life Cover
As the term 'whole life cover' suggests, a 1 crore term insurance plan provides coverage for your whole life, or till the time the premiums are paid. This ensures that you and your family are financially secure for all your life and are able to turn your dreams into reality.
Tax Benefits on Premiums
The premiums paid towards a term life insurance policy and the death benefit received by beneficiaries are both exempted from tax under the Income Tax Act under certain conditions. You can claim deductions of up to ₹1.5 Lakh under Section 80C, and the returns are tax-free under Section 10 (10D). However, tax laws are subject to change from time to time.