With the emergence of the global pandemic, people have realised the importance of financial preparedness. It is one of the best ways to secure your life and your family's future. Different financial instruments prove beneficial in this regard.
However, if you are a prominent earning member in your family, a term plan is an ultimate necessity. The real key is not just purchasing the term insurance plan but calculating the right life cover. You must have heard about the 1 crore term insurance. Is it worth your requirements? Let us try to evaluate it here!
What is the 1 Crore Term Plan?
A 1 crore term plan is a life insurance policy that provides a life cover of 1 crore for your family in case of your unexpected demise during the policy term. Your family can utilise this death benefit to pay for their routine financial needs and accomplish any future commitments.
Insurance providers have made the 1 crore term insurance premium affordable to help benefit a large section of Indian society. Also, when you choose to buy it at a young age, you will benefit from extremely lower premium rates, making it even more affordable.
Will a 1 Crore Term Insurance be Sufficient for You?
Well, the extent of financial cover required for your family's future will depend on your lifestyle and future financial commitments. And, 1 crore life cover cannot be a common value. So, you have to decide on the term life cover by making an approximate calculation based on your family's financial requirements. And, if that amount is close to the 1 cr term insurance life cover, you can opt for it, and the premium will be based on the required policy term.
How to Decide on the Right Term Cover?
There are simple and definite ways to estimate the required term life cover. Here are two different methodologies:
- Consider your current lifestyle and the annual expenditure primarily. While deciding on the annual expenditure, you have to include your monthly utility bills, grocery, and medical expenses, entertainment and vacation expenses, etc., Further discuss with your family the future financial commitments and debts such as your child's education and marriage, purchasing of assets, etc.,
- As you derive this estimate, account for the inflation rate and decide on the most approximate financial figure for your family's future. From this value, subtract the total savings fund and derive the final life cover that will suffice for your family's future in your absence.
A simple formula for quick reference based on the above calculation is
Life cover = Annual expenses considering inflation + Family's future money goals and debts - Savings
Based on this value, you can determine the required sum assured and decide on whether the 1 crore term insurance will suffice or not.
Another simple thumb rule methodology will be based on your age.
- If you plan to buy term insurance between 20 and 30 years of age, you can approximate your life cover which is 20 times your annual income.
- If you plan on purchasing it between 30 and 40 years of age, it can be 15-20 times your current annual income.
- And, if you are purchasing it above 40 years of age, it should be at least 10 times your annual income.
If this financial requirement is near the 1 crore term plan, you can purchase it without further delay.
Revising Term Insurance Need
While a definite method for deciding the life cover is beneficial, it is best to revise your financial requirements once in three to five years and make the necessary changes to the sum assured. Another best way to do it is to refine it at different stages in your life. For example, you can increase the life cover when you get married and be blessed with children.
As the dependents keep increasing, your financial responsibilities keep rising. And, the 1 crore term insurance may not suffice the increasing requirements.
After you have trickled down to the necessary fund, decide on the insurer considering their policy features, reliability, and claim settlement ratio. At Tata AIA Life Insurance, we determine customer-centric policy features and services. Tata AIA Life Insurance term policy has different customisable features to help best suit customer needs.
For example, we have different payout options on term life cover, including receiving it as a lump sum, regular monthly income, or combining both the lump sum and regular income. You can also use the top-up option to increase the sum assured at different life stages. Our customer service executive team can help you calculate the necessary fund requirements and decide if the 1 crore term insurance or other plan options will serve your needs to make a smart and wise decision.
Term insurance for your family's financial future is an important decision. Deciding on the right term plan option with the necessary features will help you benefit maximally. There are term plans that provide 1 crore sum assured. However, your decision on the requirement will be based on your family's expenses and future financial commitments.
Make simple calculations based on these requirements, account for the inflation rate, and decide the sum assured. It is also best recommended that you keep revising your plan features and the sum assured based on the increasing commitments to help best suffice for your family's future. And, if you have chosen to invest in a term plan, do it early to receive it at an affordable rate to be more cost-efficient!