Why Opt for Term Insurance with a ₹25,000 Salary?
A term insurance plan ensures that your dependents will be financially secure in case of unfortunate death of the life assured. Offering high coverage at a low cost, term insurance is a smart choice for those with limited financial resources. The simplicity of a term insurance plan is that it provides pure life protection ensuring your family’s financial stability even with a modest salary.
How Does Term Insurance Benefit ₹25,000 Salary Earners?
A ₹25,000 salary earners can opt for term insurance plan which will offer them life coverage for a set period. If the life assured passes away, the nominee receives a lump sum or periodic payout of the sum assured , to help cover living expenses, clear debts, and secure future financial needs, ensuring continued financial protection.
For individuals earning ₹25,000 a month, term insurance offers several key benefits[1]:
Budget-Friendly Premiums:
term insurance plan offers extensive coverage at affordable premiums, with lower rates if purchased early, making it a cost-effective way to secure your family’s future.
Return of Premium (TROP) Option:
Some term plans offer a Return of Premium option, refunding premiums if the life assured survives the term. These plans may also include riders such as critical illness coverage , offering added protection at a nominal additional premium.
Flexible Premium Payment Choices:
Term insurance offers flexible premium payment options—monthly, quarterly, half-yearly, or annually—making it easier to manage payments according to your budget.
Benefits of Term Life Insurance for ₹25K Salary Earners
When you earn a modest monthly income, it's important to get the value for every rupee. The payout from the term plan can help your loved ones cover household expenses, school fees, and other expenses in case of your untimely demise.
Peace of Mind
One of the biggest benefits of term insurance purchased with your ₹25,000 salary is the security it provides. Term plans give a sum assured to the nominee if the life assured dies during the policy term. This gives peace of mind to the life assured that the nominee is financially secure in their absence.
Return of Premium (TROP)
Some term insurance plans provide a Return of Premium option (TROP). With this feature, if you (the life assured) survive the policy term, the premiums you've paid will be returned , excluding the taxes that apply. It’s like having a double safety net: you get life coverage throughout the policy term, and if you outlive the policy, your premium is returned at the end of the policy term.
Additional Coverage via Riders
Riders help increase the coverage of the plan , at an additional nominal premium . Some of the riders are: accidental death benefit riders - give payout if the life assured dies due to an accident, critical illness benefit rider - provides a lump sum payout if life assured is diagnosed with a covered critical illness, etc.
Flexible Payment Options
A good term plan shouldn't strain your monthly budget, especially for individuals with a modest income. Insurers allow you to choose how you want to pay your premiums, be it at once, monthly, quarterly, half-yearly or annually. For someone earning ₹25,000 a month, being able to spread out premiums can help manage cash flow better while still enjoying the full benefits of the coverage.
Tax Advantages
Along with life protection, term insurance also helps you save on taxes. Under the old tax regime, you can claim deductions of up to ₹1.5 lakh per year on premiums paid, as per Section 80C of the Income Tax Act,1961 in case of old tax regime.
Determining the Right Coverage for a ₹25K Salary Term Plan
When choosing a term insurance plan with a ₹25,000 salary, it’s important to select the right coverage amount. A common practice is to choose coverage 10–12 times your annual income.3 With a monthly salary of ₹25,000, your annual income would be ₹3,00,000, so the ideal coverage should range between ₹30 lakhs and ₹36 lakhs.
However, your coverage requirements may vary depending on factors such as:
- Current liabilities (e.g., mortgage, car loan)
- Future educational expenses for children
- Long-term financial goals
- Retirement financial security etc
Make sure that the coverage you choose aligns with your family’s future financial needs.
How to Choose the Best Term Plan for ₹25K Monthly Salary Earners
Selecting the right term plan isn't just about choosing the most affordable premium. A term insurance for a 25K salary must balance affordability, coverage, and reliability. Start by calculating how much your family would need to manage expenses and long-term goals in your absence. Then, use a term insurance calculator to estimate the required sum assured and premium.
Financial Protection Requirements
The coverage you select should be at least 10 times your annual income. With a ₹25,000 salary, aim for ₹30 lakh coverage. This payout can give your loved ones by taking care of their financial needs such as rent, school fees etc. Other ways of calculating your coverage are through the Human Life Value method or the income replacement method. These methods help you get a more personlized estimate by factoring in aspects like liabilities, EMI, major financial burdens, inflation, etc.
Affordability
A term plan should fit your budget without compromising on coverage. When you buy a policy at a young age, especially when you're healthy and don’t have habits like smoking, the premiums can be lower.
Riders for Extra Coverage
Riders like accidental death benefit rider, critical illness benefit rider, waiver of premium, etc can give add on protection on the base plan. These come at an additional nominal cost and expand the plan's coverage significantly. Riders can vary depending upon the plan chosen.
Conclusion
A term life insurance policy is an affordable and wise decision to ensure your family’s financial security. With low premiums and significant coverage, you can protect your loved ones, even with a modest income. By carefully selecting the right policy and determining the right coverage amount that fits your needs, you ensure that your family stays financially stable. Making this decision today will offer long-term peace of mind and financial security for your loved ones.
FAQs
What is the benefit of term insurance if I earn ₹25,000 per month?
Term insurance ensures that your family is financially protected in case of an unexpected event, providing them with a lump sum or periodic payout of the death benefit to cover expenses.
How can I choose the right term insurance coverage with a ₹25,000 salary?
It is recommended to choose coverage of 10-12 times your annual income.4 With a ₹25,000 salary, coverage of ₹30 lakhs to ₹36 lakhs is recommended.
Can I afford ₹1 crore coverage on a ₹25,000 salary?
Yes, term insurance offers affordable premiums. A ₹1 crore policy can be secured for as low as ₹500–₹800 per month depending on your age, health, product and insurers terms and conditions amongst other factors.
How does purchasing term insurance early benefit me if I earn ₹25,000?
Buying term insurance early locks in lower premiums subject to factors such as medical history etc. It will also help you build a bigger financial corpus for your loved ones amid uncertain circumstances.
Does my ₹25,000 salary limit my term insurance coverage options?
No, your salary doesn’t restrict your coverage options. You can still select a high coverage amount by choosing an affordable plan within your budget.
How can I reduce the cost of term insurance on a ₹25,000 salary?
You can reduce costs by buying insurance at a younger age, and selecting flexible premium payment options like monthly premiums.
What happens if I miss a premium payment for my ₹25,000 salary term insurance?
Most insurers offer a grace period for missed payments. The grace period is of 15 days for policies where the premium is paid on a monthly basis and of 30 days where the premium is paid in quarterly/half-yearly/annual instalments, along with options to reinstate the policy without losing coverage.
What are the key features I should look for in a term insurance policy on a ₹25,000 salary?
Look for a policy that offers high coverage, flexibility in premium payments, and additional riders like critical illness or accidental death benefits etc.
Can I add riders to my term insurance with a ₹25,000 salary?
Yes, many insurers allow you to add riders, such as critical illness rider or accidental death benefits etc, for an additional nominal cost.
Is term insurance enough if I earn ₹25,000, or should I look for other coverage options?
Term insurance is a great option for most earners, providing substantial coverage at a low cost. However, you can supplement it with other policies based on your specific financial needs.
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