45K Salary Term Insurance Plan

Importance of Buying term insurance plans with your Salary

To understand why it is important to buy a term insurance plan for a Rs 45,000 salary, it’s crucial to know what is term insurance and how it can help you.

Term insurance is the purest form of life insurance that is designed to protect your loved ones in the event of your untimely demise within the policy term. Here, against the premiums paid for the policy, the nominee is entitled to receive the sum assured in the event of the unforeseen. The lump sum amount acts as a financial shield and helps the family sail through with the same lifestyle and life goals despite losing the breadwinner.

Being the simplest form of insurance where no payout is made if you survive the policy term, term insurance is a low-cost protection for your family with a substantial life cover. Thus, buying term insurance plan may ensure the financial safety of your loved ones in your absence, without being a pinch on your pocket.

How term insurance works for individuals with a 45K salary

A term insurance is designed to pay the life cover, i.e., the sum assured to the nominee if the life assured dies within the policy term. But there’s no payment if he/she survives. Here the policy term is typically long, for which you pay fixed amount premiums in your preferred schedule.

• The term insurance is a contract between two parties—the insurance company and the policyholder, i.e., the insured. Here, the policyholder agrees to pay premiums on a defined schedule for a specific policy term. The insurer agrees to pay the life cover amount to the designated nominee upon the death of the insured.
• Term plan requires the policyholder to choose a sum assured, which may ideally be sufficient to enable his/her family to maintain the current lifestyle, pay off outstanding debts (if any), and fund the desired life goals. He/she also has to choose a preferred premium schedule and frequency.
• The premium requirement in a term insurance is much lower compared to other types of life insurance, whereas the life cover is sufficiently large. Hence, for someone who earns Rs 45,000 a month, buying term life insurance might not be very difficult. The amount of premium depends on the age, gender, health conditions, family medical history, occupation, lifestyle, and habits of the policyholder.
• The insurer may validate the information you’ve shared through underwriting, conduct medical tests if necessary, and seek further details before they approve the application for insurance.
• A 45k salary term plan offers tax benefits against premium payments while the death benefits are completely tax-free.

What are the benefits of term life insurance for individuals with a 45k salary?

A financial decision for the future needs to be scrutinised well in terms of what benefits it may bring. Especially when it concerns the financial future of the loved ones, it’s crucial to understand them in detail. So, here are the two biggest benefits of buying a term life insurance for individuals with a 45k salary.

Peace of mind:

Whether the family will be able to cope with the financial setback in his/her absence is one of the biggest worries for most of the income earners with dependents. Here, if you can ensure all their monetary needs will be taken care of in your absence, it can surely bring a peace of mind ^[3] . So, that’s what a term insurance plan may do for you.

Tax benefits: 

Like any other term insurance, a 45k salary term plan comes with tax benefits ^[4] . Subject to the old tax regime, a deduction for annual premium payments of up to Rs 1.5 lakhs can be claimed under section 80C of the Income Tax Act 1961 (in case of old tax regime). While the death benefit is completely tax-free under section 10(10D), any health-related term insurance rider (if opted) can fetch you an additional deduction up to Rs 25,000 a year under section 80D (in case of old tax regime).

What should be Sum Assured of Term Plan if you are earning 45k?

Ideally, a term insurance coverage should suffice for your family’s sustenance of the current lifestyle in your absence and repayment of outstanding debts, if any, along with a corpus to fund the desired life goals. Naturally, this amount may vary across families, their respective lifestyles, financial obligations, and goals. However, a common thumb rule suggested by experts ^[5] says that the coverage amount in a term insurance should be 10 times the annual income of the policyholder.

Ideal coverage of term plan for a 45k salary:

Going by the expert view, a choice of coverage for a 45k salary can be:

10x current annual income

= 10 (45,000 x 12)

= 10 x 5,40,000

= 54,00,000

How to choose the right term plan if you are earning 45k monthly?

The choice of the right term plan depends on the individual situation and preferences of the policyholder. However, if you are earning 45k monthly, the following steps ^[6] may help.

• Choosing a right sum assured to meet the needs of your family in your absence, covering the family expenses, repayment of debts, and the corpus needed to fund life goals like the child’s education, may be good.
• Aligning the plan to your life goals, like the child’s marriage or the spouse’s retirement, can take away worries.
• Setting the premium payment as per your affordability may help avoid a financial burden.
• Opting for additional riders for accidents or critical illness can bring extra peace.
• Checking the claim settlement ratio of the insurer may save your loved ones from unwanted struggles.

FAQs:

What should be the ideal coverage amount if you earn 45k monthly?

As per a general thumb rule ^[5] , the ideal coverage for a monthly 45k salary should be 10 times the annual income.

Can I increase coverage for a 45k salary term insurance plan?

Yes, you can increase coverage ^[7] for a 45k salary term insurance plan if it has the increasing cover option enabled.

Can I buy term insurance with a 45k salary per month if I have pre-existing health conditions?

Yes, it may be possible ^[2] to buy a term plan with salary of 45K with pre-existing health conditions, subject to certain additional requirements, depending on Insurer to Insurer.

Can I buy term insurance for my entire family if I earn 45k per month?

You can purchase separate term policies for your family members according to your coverage requirements and financial situation.

What would the premium be for a term insurance with Rs.45K salary?

The premium for a 45k salary term insurance varies depending on several factors such as ^[1] the age, health, and personal details of the policyholder.

References

1.https://www.investopedia.com/terms/t/termlife.asp

2.https://www.renewbuy.com/articles/life-insurance/eligibility-for-term-insurance

[3]https://economictimes.indiatimes.com/wealth/insure/advantage-of-term-insurance-over-other-types-of-life-insurance/articleshow/67955148.cms?from=mdr

[4]https://cleartax.in/s/term-insurance-tax-benefits

[5]https://www.livemint.com/money/personal-finance/how-much-term-insurance-coverage-you-should-consider-11660848833214.html

[6]https://www.livemint.com/focus/how-to-choose-the-best-term-insurance-plan-11734669366130.html

[7]https://www.moneycontrol.com/news/business/personal-finance/how-you-can-increase-your-term-insurance-cover-amount-6570931.html