Term plans have evolved over the years, and today these policies offer several beneficial features. With a term plan, you can be assured of the financial stability of your family in your sudden absence.
A term policy is a pure life cover that pays the sum assured (SA) to your nominee in case of an unfortunate event. Your family members can use the money for various expenses, such as repaying outstanding debt, meeting their monthly expenses, or financing your children’s education provided you have planned and taken a cover that would support their needs in your absence.
What is an INR 1 crore term plan?
Insurers offer term insurance in India with a higher SA starting from INR 1 crore up to INR 100 crore, or more. The SA is the maximum value that the insurance plan will pay to your nominees in your absence during the policy’s duration.
An INR 1 crore term plan is an insurance policy with a SA of this amount, which the insurer will pay to your nominees if something tragic happens to you during the policy’s term. If you are aged between 30 to 35 or are the sole earning family member, an INR 1 crore term insurance plan could be beneficial. However it is always advised to take up a life insurance cover amount that suits your requirements.
Here are two advantages of this type of term insurance plan:
- Protection against inflation
The costs for different amenities like education, healthcare, housing, and regular household expenses have increased due to inflation. These will continue to rise even in the future, and an INR 1 crore term plan can safeguard your family against inflation when you are not around to take care of them. The higher SA payout will allow them to sustain their lifestyle and meet their daily expenses without financial difficulties.
- Meeting financial goals
In case of an unexpected circumstance that can lead to your untimely absence, your family may not have adequate savings and investments that would cover financial goals, like children’s higher education and their wedding or your spouse’s retirement. Your loved ones may have to compromise on these ambitions due to a lack of funds, and an affordable way to prevent this is to buy an INR 1 crore term plan.
Although INR 1 crore may seem like a large amount, it may not be sufficient to cover your family’s monetary needs. Here are three factors you must consider to calculate an adequate SA:
- Family’s requirements
The SA should be an amount, which if invested in a conservative portfolio, offers enough returns to meet your family’s expenditure and future aspirations. It is essential to consider your age and life stage to determine the SA. Generally, it is recommended that the term insurance cover should be 12 to 15 times your family’s annual cost. Thoroughly analyze your expenses, liabilities, investments, and financial objectives to calculate the right amount. An online term plan calculator can help you determine the ideal sum assured as per the needs of your dear ones.
- Claim settlement ratio (CSR)
The CSR is the ratio between the number of claims settled and the total claims received by the insurer during a particular period. A higher CSR indicates that when your family files a claim in the future, the insurer will most likely approve and settle it. You can check the CSR of life insurance companies on the Insurance Regulatory and Development Authority of India (IRDAI) website.
- Policy duration
As a term plan is a simple type of life insurance policy, it is important to opt for a longer period. Doing this shields your family in the long term. Invest in a term plan that provides coverage until your retirement age or even during the retirement years.
Insurers offer many additional riders for an extra term insurance premium. These include critical illness, waiver of premium, disability, and accidental death riders. You can add one or more of these riders based on your requirements for comprehensive coverage.
Remember that the term insurance premium increases for a higher SA. Therefore, ensure you choose a cover where you can pay the premium without financial distress. The SA should not be based on a figure like INR 1 crore; however, it must relate to your family’s needs and expenses.