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 Why You Need A 1 Crore Term Insurance Plan

1 Crore Term Insurance

Why You Need A 1 Crore Term Insurance Plan


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May 28, 2020

By : Bajaj Allianz Life

Term insurance plans have evolved significantly over the years, and today, they offer a number of features and benefits that prove to be extremely useful. You can now be rest assured that in case of your untimely or sudden demise, your family will have a substantial amount to fall back on.

Both offline and online term plans offer sum assured amounts as high as starting from ₹1 Crore to up to ₹100 Crore and more also. Sum assured can be picked or selected by an individual depending on their requirements. With a plan like this, you can secure your future and the future of your family.

What does sum assured mean in term insurance?

In simple terms, the sum assured is the value of insurance cover provided by the insurer when you purchase the term plan. It’s the amount that the insurer pays out to the beneficiary in case of death of the life insured. For instance, say you purchase an online term plan where the insurer agrees to pay a sum of ₹1 crore in the event of your unfortunate demise. That amount is referred to as the sum assured.

So, let’s say when you purchase a ₹1 crore term insurance plan, you are eligible for a sum assured of ₹1 crore. Here are some other points to note about the sum assured under an insurance policy.

• The premium charged for a term insurance policy depends, among other things, on the sum assured chosen by you.

• You can make use of an online term insurance calculator to understand how the amount of premium you pay changes as the sum assured increases.

• The premium you pay can be deducted from your total taxable income as per section 80C of the Income Tax Act, 1961. However, to be eligible for these tax benefits, you need to ensure that the sum assured is at least 10 times the annual premium charged for the policy.

• The sum assured, which is received as part of the death benefits under the insurance plan, is exempt from tax as per section 10(10D) of the Income Tax Act, 1961. The aforementioned term insurance tax benefits are subject to changes in tax laws, as amended from time to time.

Many online term plans as well as offline insurance policies offer sum assured amounts starting from ₹1 crore up to ₹100 Crore and even more. Opting for a high death benefit can be incredibly helpful to you and your family. Let’s see how.

What are the benefits of term plans with a sum assured of ₹1 crore?

A high sum assured comes with several upsides. By investing in a ₹1 crore term insurance plan, you stand to benefit in a number of ways. Here’s a closer look at the benefits of term plans with a sum assured amount of ₹1 crore.

A higher sum assured acts as a hedge against inflation

A quick look at the past shows us that prices have risen significantly over these years. The costs of basic amenities have increased. Medical care is more expensive, as are other facilities like education and housing. This trend is certain to continue into the future. So, if you wish to ensure that your family has sufficient funds to fall back on, you’ll find that a ₹1 crore term insurance plan is one of the preferred investment option. However, if you want to take a plan with a sum assured of more than ₹1 Crore, you can do that depending on your risk appetite and life goals. A smaller sum may not be enough to get your family through everyday life if the costs soar higher, as they’re bound to.

It helps your family meet significant expenses in the future

If you invest in a ₹1 crore term insurance plan in your twenties, your plan will probably expire only when you’re in your fifties or so. Some plans even offer longer coverage, so your insurance remains valid till you’re in your sixties. In case of your sudden demise, there could be situations where your family does not have enough savings, hence your family will have no way to pay for significant expenses in the future without a life cover. Costs like your children’s educational expenses, their wedding outlays, and any serious medical expenditure can be handled more smoothly if your family has the benefits of at least a ₹1 crore term insurance plan. They could have a term insurance plan with higher sum assured also.

What are some factors to keep in mind while considering term plans?

Before investing in an online term plan or an offline term policy, you need to consider certain factors. This strategy helps you make an informed and prudent choice. Here are some things to keep in mind before you purchase a term insurance plan.

The life cover offered

The life cover or the sum assured is one of the most important aspects to look into before you put your money on an insurance plan. Take your regular annual expenses into account, make room for inflation, and add a sizable margin to determine the life cover that’s ideal for you. If you have a family with 2 or more children, a ₹1 crore term insurance plan is what your family may ideally need to get through in case you’re no longer around. However, this would not be it. It is always a good idea to take a few factors into consideration like liability, age, how long one intends to work etc. before deciding on your sum assured. There are a lot of term insurance calculators available which could give you an idea of what your right insure amount should be depending on multiple factors.

The policy duration

Since term insurance plans are pure life covers, it’s advisable to opt for policies that come with a longer duration. This way, your life cover is valid for a longer period. Ideally, your plan must extend into your sixties or later, so you’re covered up to your retirement or post retirement age. Some term insurance plans also offer whole life coverage, so you’re protected till you’re 99 years of age.

The insurer’s claim settlement ratio

This is the ratio of the claims settled by an insurer to the total number of claims received by them. The higher the claim settlement ratio is, the better are the chances of your family’s claims being paid out by the insurer. It’s advisable to look into the claim settlement ratio of various insurance providers and choose a suitable insurer to purchase your term plan from. You can take a look at the IRDAI’s annual report to find these ratios.

The rider options available

Term insurance plans do not offer any maturity benefits. However, to enhance the cover offered, many insurers now provide rider options on term plans. Some such riders include critical illness benefit rider, accidental death benefit rider, accidental disability riders, and waiver of premium rider. Look for the rider options available before you purchase a term plan, so you can enjoy a wider range of benefits.

Conclusion

You can use an online term insurance calculator to determine your life insurance cover requirement. ₹1 Crore term insurance plan would not be the only solution as insurance providers provide sum assured which could be more than ₹100 Crore also. Hence one should always evaluate their needs before deciding on their life cover requirement. Adequate term insurance plans help in ensuring security of your loved ones.

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