How Does a 50 Lakh Term Insurance Plan Work?
50 lakh term insurance works the same as any term insurance policy.
The premiums for the plan are decided on policy purchase. They will remain level throughout the policy's term. The plan will offer a death benefit to your family members in the event of your passing.
Moreover, unless you have opted for an ROP feature, the plan will not offer any survival/maturity benefits if you outlive the policy term. The sum assured amount will lapse along the with policy on expiry.
To give you a better idea, let us consider an example to see how 50 lakh term insurance works.
Example:
Mr. Navin aged 33, non-smoker is a salaried employee who buys a 50 lakh term insurance plan to secure his family – his wife and dependent child. He opts for a basic plan with a tenure of 30 years and names his wife as the beneficiary. Under these parameters,
- If Mr. Navin dies during the 30-year policy term, his wife will be paid the ₹50 lakh death benefit by the insurance company. This amount will be fully #tax-exempt under applicable tax laws.
- His 50 lakh term insurance premiums will be ₹11,193 per year. It will stay the same throughout the 30-year policy term.
- If Mr. Navin survives the policy term, he will not receive any payouts or maturity proceeds, and the policy's coverage will lapse on maturity/expiry.
For 50 Lakh Term Insurance With Return of Premium:
- In case he opts for an ROP feature his annual premiums will increase to ₹19,486 and he will be offered a refund on all premiums paid during the policy's term on maturity.
- This maturity benefit will also be #tax exempt since his annual premiums do not exceed ₹5 lakhs. If yearly premiums exceed ₹5 lakhs, he will be taxed according to his tax slab rate under his chosen tax regime. This is as per the Central Board of Direct Taxes (CBDT) new guidelines.
Also Read: Term Insurance Tax Benefits Under Section 80C & 80D