A term insurance plan of INR 2 crores offers a sum assured of INR 2 crores at an affordable premium rate. These Insurance policies are pocket-friendly as they do not offer investment or maturity benefits. It provides financial security to the family members in the absence of the insured, i.e., the sudden demise of the insured, ensuring long-term security and peace of mind.
Is INR 2 Crores the Right Coverage Amount for a Term Insurance Plan
Generally, it is recommended to invest an amount equal to 10 times the annual income as the sum assured. However, some experts have also suggested it 20 times. To know more, let us have a look at the key factors which will help determine whether a 2 crore term insurance will be right for you or not:
- Dependent Family Members and Living Expenses
The number of family members and the monthly or annual expenses incurred by you towards your family will help calculate the future needs in terms of finances. Look for your recurring and short-term future financial obligations and deduct the investment amounts to know the amount of sum assured. Also, you should look for the number of dependents and working members in the family to have better clarity on the amount of sum assured.
- Understand Your Financial Liabilities
In case of pre-existing liabilities or future financial commitments such as a child’s education or marriage, consider these factors as well to know the amount of sum assured. After taking the inflation factor into consideration, check whether the amount of sum insured you decided upon will meet the financial finances in future in your absence or not.
- Annual Income and Retirement
Your annual income also plays a vital role in determining the amount of sum assured. If the policy holder is young and has lesser financial obligations to be met, opt for a term plan with life-stage benefits, as it will enhance the chances of an increase in the sum assured.
On the contrary, if you are older and have a well-settled retirement plan with you, children are also independent; no need to opt for a high sum assured.
- Human Life Value
Calculate the economic value of self by taking future liabilities, income, expenses, and investments into consideration.
- Account for Inflation
Inflation increases the cost of meeting a financial goal over a period of time.
Hence, the sum assured should be enough to meet future payouts and the financial needs of the family members, depending on the future cost of living.
This can be done by calculating the funds required depending on the financial goals of the family and revising the amount based on the inflation rate to derive a realistic value.
How to Choose the Best Term Insurance Plan for 2 Crore?
Provided below are the key points that should be considered when choosing the Best Term Insurance Plan for 2 Crore
- Insurance Providers
As we know, not all insurance providers are similar in terms of their services and plans; one should always look for the CSR, reputation, and reviews of the insurer before buying a term plan from them.
- Coverage
To know how much would be sufficient to meet the financial requirements of the family, one should look into present liabilities, expenses, and future obligations. Also, the inflation factor should be taken into consideration as it is an important factor, too.
- Policy Term
Looking into the financial goals and the present liabilities, one can determine the policy tenure and the coverage amount.
- Premium
Though the term insurance premiums are quite affordable, their rates still depend on the age, policy tenure, and sum assured. Also, the best term insurance plan for 2 crores will provide an insured with affordable premium rates along with some discounts.
- Riders
One should opt for a plan that provides rider options to meet maximum financial coverage. This will provide them with benefits like critical illness, unforeseen financial events, accidental death, etc.
- Tax Benefits
Choose a plan which provides income tax benefits as per the applicable laws of taxation.
How Does a 2 Crore Term Plan Work?
In the unfortunate event of the death of a policyholder during the policy tenure, the term plan will disburse the payout, i.e., a death benefit of INR 2 crores to the beneficiaries of the policyholders, subject to certain terms and conditions:
Choose the following at the time of purchasing the policy:
- The sum assured in the policy which will be INR 2 crores
- Policy Tenure
- The payment frequency of the premium can be monthly, quarterly, half-yearly, or yearly.
- Terms of Premium payment terms
- Optional riders, as per the requirements of insurance and its availability.
The premium amount would be calculated based on information provided, such as age, lifestyle habits, and other factors. You are required to make a payment towards the calculated premium for the tenure opted at the payment frequency when deciding on the premium.
Factors Affecting the 2 Crore Term Insurance Plan
| Age of the individual | The higher the age, the higher the premium would be because the risk involved for older individuals is also higher. |
| Gender | The premium amount in the case of females is usually lower than for males as women have a higher life expectancy in comparison to men. |
| Lifestyle habits | Lifestyle-related habits such as drinking alcohol, smoking, and pre-existing medical conditions, if any, can increase the premium amount due to them involving higher risk. |
| Tenure of the policy | The premiums for term plans for longer tenure are higher than those for shorter ones as the insurer provides coverage for a longer period. |
| Policy coverage | Term plans with higher sums are assured to attract higher premiums and vice versa. |
| Options riders added | Many riders also influence the cost of premiums and increase your amount of premium. |
Conclusion
A 2 crore term insurance plan helps give financial protection to the family members of the policyholder in case the insured dies.
When you buy a term insurance plan, it is feasible to choose an optimal coverage amount that is sufficient to fulfill all your family’s financial needs.
So, understand how the INR 2 crore term plan works and how much it costs and identifies its suitability. In case the insurance plan fulfils your and your family’s financial needs, buy the insurance coverage to get complete financial security.
