As we know, term insurance is the cheapest life insurance product available in the market. You must’ve come across the Rs. 1 Crore term insurance plan, one of the most popular coverages in India. For the working population, Rs. 1 Crore sounds like more than enough as coverage, especially when it is offered at an affordable premium rate.
However, in reality, do you think that the Rs. 1 Crore term insurance cover is sufficient? Do you believe that this amount will be able to secure your family financially in your absence? Well, keep reading to find out.
Rs. 1 Crore Term Insurance Cover Should Not Be A Benchmark
It is not necessary to follow this benchmark figure. Rs. 1 Crore as compensation may be sufficient for some people. However, this amount differs from families to families. The term insurance cover you need can be determined after you calculate your income, expenses, other financial liabilities, savings, and future financial goals.
Moreover, you have to consider your family’s financial requirements when determining the coverage. Based on all this, you will be able to rightly estimate your term insurance coverage. If your financial liabilities and future financial expectation surpass the benchmark value, and you decide to stick to the Rs. 1 Crore term plan, your family will fall short on money in your absence.
So, What Should Be My Term Insurance Cover?
As stated earlier, term insurance cover depends on several factors. Ideally, you should opt for coverage that is 10 to 15 times more than your current annual income. But again, this thumb rule may not apply to everyone.
The term insurance coverage threshold begins from Rs. 50 Lakhs, Rs. 1 Crore, Rs. 2 Crore, etc, and can vary from person to person. The coverage is determined based on your current income status, the number of dependents, and their future financial goals.
You can use the following formula to estimate the term insurance coverage that you may need.
Term Insurance Cover = [Family’s Expenses + Expenses on Future Goals + Your Financial Liabilities] – Savings.
It is imperative to factor in your family’s growing financial needs over the future. You can start with a smaller coverage but make sure that you review your term insurance policy regularly. That way, you can evaluate the changing needs and make necessary changes to your term insurance coverage.
In case you are worried about how much that will cost you, use the term insurance calculator to determine the same. The tool helps in estimating the term insurance premium amount based on your desired coverage and rider benefits.
Besides, consider your financial liabilities (any outstanding loans/debts), the number of years your family will need money until someone else takes over the financial responsibilities, and other significant expenses (such as your child’s future) when determining your term insurance coverage.
To Sum It Up!
So, if you are planning to buy a term insurance plan any time soon, do not blindly invest in the Rs. 1 Crore term plan. Evaluate your family’s future financial needs and opt for the term insurance coverage accordingly. After all, they’re the ones who would benefit the most from this policy in your absence.