How to choose the best sum assured for the term plan?

Consider multiple factors such as the financial needs of your family, your future expenses, inflation rate and outstanding debts to choose a sum assured for your term plan to ensure that your family meets their financial needs and covers these costs in your absence. You can use several methods as mentioned above, to determine the suitable coverage for your term plan. Alternatively, you can use the online term insurance calculator for free, which will help you determine the best sum assured for your term plan based on the inputs provided.

Does the ₹2 crore term plan give a maturity benefit of ₹2 crore if I survive the policy tenure?

Term insurance plans usually have no maturity benefit. However, if you have opted for the return of premium option, your premiums are refunded if you survive the policy tenure. If the aggregate premiums paid over the tenure equal to or exceed ₹2 crores, you will get the amount on maturity. However, if the aggregate premium is lower than ₹2 crore, you will get the lower value, which is the sum of the premiums paid.

Is there an additional premium payable for a rider?

If you choose an optional rider with the ₹2 crore term insurance plan, an additional premium would be payable for the same. Each rider includes an additional premium, which is added to the premium of the base policy that you buy.

How long does it Take to Get a Claim Payout?

The time for paying out the claim depends on when the claim has been made and whether or not all documents have been submitted. As per regulation 14 (2)(i) of the IRDAI (Policyholder's Interest) Regulations, 2017, to safeguard the Policyholder’s Interests, the insurer is expected to settle any claim within a period of 30 days from the date of receiving all documents and clarification. However, Insurance companies try and pay out the claim as quickly as possible. However, if the death was due to suspicious reasons for which the insurer wants to conduct an investigation or if the documentation is not proper, claim payouts might get delayed.

Is a medical checkup necessary to buy Rs.2 crore term insurance?

Since the sum assured is of considerable amount, the insurance company might insist on a health check-up before issuing the term insurance plan.

Is a Rs.2 crore term insurance plan sufficient for my needs?

The sufficiency of a Rs.2 crore term insurance plan depends on your financial goals, existing assets and liabilities, income, number of dependents and other factors. So, you should consider all the factors to find the ideal sum assured for your coverage needs. If the ideal sum assured is up to Rs.2 crore, then the Rs.2 crore term plan would prove sufficient. However, if you have more financial goals or needs, you might have to choose a higher sum assured.

Can I buy Rs.2 crore term insurance online?

Yes, it is possible to buy a Rs.2 crore term insurance plan online by following the online process specified by the insurance company.

Which plan tenure should I choose?

You should consider a term plan at least until you retire. A 30-year-old might choose a term of 30 years in this case. A 40-year-old, on the other hand, might select a 20-year policy term. In both scenarios, the retirement age is considered as 60 years. This will vary from organisation to organisation and the life goals of the person.

Which sum assured should I select?

As you can see from the information above, the sum insured amount is based on the financial requirements of your family. The amount you choose should ideally assist in covering any lost income as well as unpaid bills, among other expenses.

Are riders for term insurance required?

Although they are not always required, term insurance riders can offer additional financial security. An accidental death rider may be more useful to people such as one who works in factories or travels frequently for employment. Based on your unique requirements, you should choose the riders. Remember that your term plan premium will be impacted by the riders and add-ons you choose.

Buy Best 2 Crore Term Insurance Plan & Policy In India In 2024

Reasons to Buy 2 Crore Term Plan

Some Reasons Why You May Consider a sum assured, like Rs.2 Crore, in your Term Insurance Plan are as Follows –

Enhanced coverage for financial security

Enhanced coverage for better financial security

With a Rs.2 crore term plan, the death benefit payout will be ₹2 Crore. This may give your family adequate financial assistance to help them face their financial needs in your absence, subject to outstanding debts and/or daily expenses. When the coverage is enough for you, you can enjoy better financial security, knowing that in your absence, your family’s financial needs may be suitably taken care of.

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Helps in goal fulfilment

If you have multiple goals, a good corpus is needed to fulfil them. The payout from the policy would help your family meet their different financial goals in your absence like a child’s higher education, buying a home, retirement planning, etc. The plan would give sufficient funds to your family so that most of your goals can be fulfilled even when you are not around.

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Affordable coverage

While a Rs.2 crore term plan offers an optimum sum assured, the premiums might usually be affordable. You can break down the premium payment into monthly, quarterly or half-yearly frequency and pay it easily.

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In the event of the unfortunate death of the policyholder during the term of the policy, a 2 crore term insurance plan will pay out the death benefit of Rs.2 Crores to the nominees/beneficiaries listed under the plan, subject to the fulfilment of the policy terms and conditions.

At the time of buying the policy, you have to select the following:

The sum assured in the policy which will be ₹ 2 crores
The term of the policy
Premium payment frequency which can be monthly, quarterly, half-yearly, or yearly
Premium payment terms
Optional riders, as per your insurance needs and availability.

The premium of the policy would be determined based on the details you choose, your age, lifestyle habits, and other factors. You will have to pay the calculated premiums for the chosen premium payment term at the chosen premium payment frequency.

The policyholder pays premiums to the insurer, and if the insured passes away during the policy's term, the death benefit is paid. Under basic term plans, no maturity benefit is payable on survival until maturity. However, if you have opted for the return of the premium term plan, the premiums paid will be refunded.

For instance, say a 35-year-old non-smoking male opts for the Bajaj Allianz Life e-touch. He chooses a sum assured of ₹2 crore, a coverage tenure of 40 years, and regular annual premiums. If he chooses the term insurance with return of premium, he pays a premium of Rs.45,142/year for the 1^stmonth and from 2^ndmonth onwards he will pay Rs.53,244/year every year. The plan will pay a death benefit of ₹2 crore if he passes away during the policy tenure. However, if the life assured survives the policy tenure, he will receive Rs. 21,21,668 as maturity benefit^%.

Is 2 crores the right coverage amount for your term plan?

The sufficiency of a ₹2 crores coverage for your term insurance policy depends on your insurance needs. You should assess the right coverage based on several factors such as your age, your income and expenses, your number of dependents, your financial goals, your lifestyle habits, existing assets and liabilities and other relevant factors. You can use the online term insurance calculator and fill in your details and insurance needs to find out if ₹2 crores is the right coverage amount for your term insurance plan. Further, in addition to the online term insurance calculator, there are other ways to check and calculate the right coverage amount for your term plan, stated as follows:

Underwriter’s Thumb rule

Under the Underwriter’s Thumb rule⁴, the coverage amount is also calculated considering the individual's annual income. However, the multiple in the thumb rule changes with age and is multiplied by a specific factor which varies with the age of the individual. For individuals aged between 20 and 30 years, the amount is calculated by multiplying their annual income by a factor of 15. The multiple starts are decreasing as the age increases. It is typically 14 for individuals aged 31-40 years, 12 for individuals aged 41-45 years, 10 for individuals aged 46-50 years, 8 for individuals aged 51-55 years and 6 for individuals aged 56 years and above. For example, an individual aged 35 years earns ₹15 lakhs annually and may get a coverage of ₹2 crores (15 lakhs^*14).

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Human Life Value (HLV) method²

Under the human life value method, the coverage is calculated based on an individual's economic worth to their family. It ascertains the overall value of your life in financial terms and calculates the sum assured that would be sufficient to provide regular income to your family for their financial requirements in your absence. For instance, if you earn ₹15 lakhs and your annual personal expenses are ₹5 lakhs, you can provide your family a surplus income of ₹10 lakhs. Hence, in your absence, your family would face a financial shortfall of ₹10 lakhs per year (₹15 lakhs - ₹5 lakhs). Now, assuming a risk-free rate of return of 5% per annum, the sum assured required to generate an annual income of ₹10 lakhs would be ₹2 crores (₹10 lakhs / 0.05).

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Income Replacement¹

In this approach, the assumption is that life insurance is intended to compensate for the lost income of the primary wage earner. One of the most straightforward methods for determining your income replacement worth is insurance cover = current annual income x years left to retirement. For example, if you are 40 years old, your yearly salary is ₹ 10 lakhs and you plan to retire at the age of 60 years, the cover you will need is ₹2 crores (10 lakh x 20)

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Expense Replacement¹

In this recommended method by financial advisors, individuals are tasked with calculating their daily household expenses, loans, and long-term goals such as children's education, along with providing for financially dependent parents throughout their lifetimes. The total amount calculated represents the financial needs of the family. The subsequent stepinvolves subtracting the present value of existing investments and life insurance coverage. When evaluating investments, assets like the primary residence and car are excluded since family members typically continue using them. The resulting figure, after deducting investments and insurance coverage from expenses and goals, provides an estimate of the necessary coverage.

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Choosing the best 2 crore term insurance plan requires careful consideration of several factors to make sure that it aligns with your specific insurance needs as well as financial goals. Here are some factors which you may consider –

Coverage offered

Check the coverage offered in the term insurance policy. Look for the return of premium options, joint life coverage, increasing sum assured, and additional riders, which will increase the coverage scope. Find and select a term plan which aligns with what you need and offers higher protection at competitive rates.

Premiums

Ensure to check and compare the premiums across different ₹2 crores term insurance policies vis-a-vis the coverage offered. The best policy would be the one that offers a good scope of coverage at the most competitive premium rate.

Claim Settlement Ratio

The claim settlement ratio is calculated as a ratio of the number of death claims an insurance company has settled to the number of death claims received. It is necessary to check and compare the claim settlement ratio of different insurance companies and select the one with high claim settlement ratio for a better claim settlement probability. Bajaj Allianz Life Insurance Company has a good record of claim settlement of 99.23%^@ of all death claims admitted for the specific financial year 2023-24.

Ease of Purchase:

Opt for term plans that are easy to purchase, ensuring quick coverage benefits and convenience. Most insurance companies offer the benefit of buying term insurance online, which fastens the entire process and ensures coverage as soon as possible.

Smooth Claim Process:

Choose a term insurance plan with a smooth and simple claims process, including an easy filing process and quick turnaround settlement time to enhance the satisfaction of the policyholder and ease of handling in case of unforeseen circumstances.

Factors	Description
Age of the individual³	The age of the individual is a crucial factor which influences the premium of the plan. The higher the age, the higher would be the premium and vice versa as the risk involved for older individuals is also higher.
Gender³	The gender of the individual also influences the premium. Term insurance premiums for females are usually lower than for males as females have a higher life expectancy in comparison to males.
Lifestyle habits³	Factors such as consumption of alcohol, smoking, etc. and pre-existing medical conditions, if any, can shoot up the premiums as they involve high risk.
Tenure of the policy⁷	The premiums for term plans for longer tenure are higher than shorter ones as the insurer provides coverage for a longer period.
Policy coverage⁶	Term plans with higher sum assured attract higher premiums and vice versa.
Options riders added⁵	Each rider that you buy with your term insurance policy comes at an additional premium cost. Several optional riders also influence the cost of premiums and increase your premium amount.

Factors

Description

Age of the individual³

The age of the individual is a crucial factor which influences the premium of the plan. The higher the age, the higher would be the premium and vice versa as the risk involved for older individuals is also higher.

Gender³

The gender of the individual also influences the premium. Term insurance premiums for females are usually lower than for males as females have a higher life expectancy in comparison to males.

Lifestyle habits³

Factors such as consumption of alcohol, smoking, etc. and pre-existing medical conditions, if any, can shoot up the premiums as they involve high risk.

Tenure of the policy⁷

The premiums for term plans for longer tenure are higher than shorter ones as the insurer provides coverage for a longer period.

Policy coverage⁶

Term plans with higher sum assured attract higher premiums and vice versa.

Options riders added⁵

Each rider that you buy with your term insurance policy comes at an additional premium cost. Several optional riders also influence the cost of premiums and increase your premium amount.

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