1 Cr Term Insurance. Is it enough for you?

There are various insurance products present in the market, such as term life insurance, guaranteed income plans, ULIPs, etc. Term insurance is the simplest form of life insurance that covers you for a limited period, such as 40 or 50 years. In exchange for regular payments, also known as premiums, the insurer pays out money to your loved ones when you are not around. With term insurance in place, your family has a safety net to replace your income, pay debts, send kids through college, or take care of other important future expenses. 

Term life insurance plans are one of the top choices for people who want to take care of financial obligations for their family. 

What is a 1Cr Term Plan? 

A Term Insurance Plan is a type of life insurance policy that may be purchased by an individual to secure their family’s financial future. Simply put, it's a contract between you (the policyholder) and the insurance company that assures that if you unfortunately die within the agreed policy time, your family members (beneficiaries) will receive a sum assured. A 1 Cr term plan is a term insurance plan that guarantees a sum assured of at least ₹1 crore upon your death.   

Having a term insurance plan helps in safeguarding you and your family needs by putting you on a road to financial security. Term life insurance provides instant protection and gives you access to features such as a child future option, better half option, limited pay option, and much more for the future if your life circumstances change. This benefit received will help your family deal with their financial loss in your absence.  

Is 1 Crore Term Insurance Enough? Ways to Evaluate 

₹1 crore sounds like a sufficient amount on paper, but is it enough to cover all the needs of your loved ones? The amount of life insurance you need to secure your family completely depends on your annual income, expenditures, and your family’s overall standard of living. If ₹1 crore is enough to meet all your family’s needs for at least a few years, then a 1Cr term plan is ideal for you.  

The best way to find your ideal life cover is calculate your Human Life Value (HLV). Your HLV is the total amount of money you can earn over the course of your working career, assuming that your income remains the same. The Human Life Value can be a great approximation of your required sum assured, at least for your family’s current living standards. If your HLV is less than or equal to ₹1 crore, then consider buying a ₹1Cr term plan to secure your family. However, if your HLV is significantly greater than ₹1 crore, then you need to look for a term plan that offers a sum assured equal to your HLV.  

Reasons to Buy a Term Insurance Plan 

• If you are concerned about the financial security of your family in your absence, then having a term plan is an excellent option for you. 

• If you are someone young and the sole breadwinner of your family, a term insurance policy of 1 crore can undoubtedly assist you in providing much-needed financial support to your loved ones, even if you are no longer around to do so. 

• If you are someone with financial debts and you don’t want to put a burden on your family in the event of any unprecedented circumstance, a 1 crore life insurance premium can help your family pay off loans. 

• If you are someone who wishes to guarantee financial security for your child’s schooling or marriage, or fulfil their career plans or travel dreams, even in your absence.  

Why Should You Opt for a 1 Crore Term Plan? 

• Early Bird Savings on Premiums!: The more candles you blow on your birthday cake, the greater the amount of premium you pay. That is, when you are young, your premiums are lower. You buy early, you pay the same amount throughout your policy term, and you save big. 

• Light on Your Pocket: With term insurance, there is no return on investment or wealth growth that you may expect with the insurance. Hence, the premium for a term plan is significantly cheaper than that of all other life insurance plans. 

• Avoid Last Minute Financial Burden: You may be planning to get term insurance, considering your household needs and children’s education. Do not forget about those loans, debts, or any other financial liabilities that come into consideration while choosing your term insurance plan. In your absence, the burden of repayment can fall on your family members. Hence, to repay the loans and liabilities, a 1 Cr term insurance plan will come in handy. 

• Beat that inflation!: The retail inflation rate is at 4.6% as of FY 24-25, and is expected to rise in the next financial year. You may think that a 1 Cr term plan is a big amount right now, but after you factor in the rate of inflation, it will look like the right thing to go for! 

• Riders:  Riders are optional benefits that come at a low cost with your term insurance policy. Riders such as the Critical Illness Rider, Accidental Death Benefit Rider, Accidental Total & Permanent Disability Rider, Hospital Cash Benefit Rider, and Waiver of Premium on Critical Illness Rider are available in plans. 

An Example of How 1Cr Term Insurance Can Secure Your Family 

Let’s take the example of Mr Ashok, who needs a term insurance plan to secure his family’s future in case he is not around to support them. Mr Ashok is 28 years old and has no financial liabilities or dependents right now. However, by the time he reaches 35, he expects to have a family and a house of his own, which he plans to buy with the help of a home loan. 

Hence, it would be wise for Ashok to choose a 1 Crore term insurance plan at his age, since his premiums will be lower now than they would be once he crosses 30. A ₹1 crore sum assured will help his family maintain their standard of living in his absence. Moreover, his family will also be able to use this money to pay off their home loan instalments.  

As Mr Ashok gets older and has more responsibilities, he can increase his life cover and expand the term insurance policy to include his wife and children. 

Benefits of Opting for 1 Crore of Term Life Insurance 

• In the event of the policyholder's untimely death, the nominee will receive the total pay-out as a lump sum, a lump sum and a monthly pay-out, or only a monthly amount. 

• The lumpsum, monthly or combination amount received will help your family live a financially secure life in case of your absence. 

• The premiums paid for purchasing 1 Cr term life insurance have tax benefits under section 80C. Furthermore, the maturity amount has tax-benefits under section 10(10D). 

•  One of the best things about term insurance plans is that they are super-beginner friendly. Since there is no investment element involved, all you need to do is pay your premiums, and you are insured for the selected duration. 

• Another interesting feature of a term insurance plan is choosing an option for return of premiums. Meaning, if you survive your policy period you will get total returns of your premium. 

 Things to Keep in Mind When Investing in a 1 Cr Term Plan? 

The main thing to keep in mind when buying any life insurance policy is to keep reevaluating your sum assured based on your current income. Say you earn ₹10 lakhs per year right now, meaning that your HLV is also around ₹1 crore. At this point, a 1Cr term plan should be sufficient to cover your family’s needs in your absence. However, 10 years down the road, you might double or even triple your annual income! Most people grow their Human Life Value as they gain more experience in their career.  

As your income increases, your family’s standard of living improves, and your annual expenses also increase accordingly. Hence, your term insurance plan also needs to be adjusted to meet your family’s growing demands. A 1Cr term plan may be good enough for your loved ones today, but you might need to increase your sum assured in the future to ensure your family’s security in your absence. This is why you should always evaluate the usefulness of your term plan every few years, especially if you get a major boost to your income. Keep your family secure by keeping your term insurance cover up to date! 

Conclusion 

Term insurance is a great tool to ensure your family’s financial security. Most insurance providers in India offer term plans with ₹1 crore life cover. You can compare and contrast various plans offered by different life insurance companies. Find one that gives you your desired sum assured for an affordable premium rate. Don’t delay your family’s security! Get life insurance today to ensure your peace of mind for tomorrow.  

Siddhant Dubey - Writer & Photographer 

Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision.