Obtaining a term insurance plan is very essential to ensure the financial safety and security of your family despite your absence. It is all the more essential if you are the sole breadwinner in the family. However, the baffling question that arises in this context is how much a term plan will prove to be sufficient in the long run.
It is better to purchase a term plan early in life when the responsibilities remain low. Under such circumstances, you might consider purchasing a 2-crore term insurance. In this article, we will focus on the highlighting aspects of 2-crore term insurance.
Why is 2-crore term insurance essential?
Most of the conventional term plans allow life coverage for a specific tenure. However, certain special variants offer life-long coverage these days. These plans are carefully crafted to offer secured financial protection during challenging times. The maturity benefits can be utilized to fulfil certain special financial targets.
Before you purchase a term plan, you need to consider the sufficient coverage amount. It is essential to keep a cushion here and decide on a high coverage amount to be on the safe side, considering the future market inflation. The sum assured must be ideally decided based on Human Life Value or HLV, referring to the current value of future liabilities, investments, and income expenses.
What is meant by a 2-crore term insurance?
After careful consideration of the HLV and other associated aspects, you may choose to purchase a term plan with a sum assured of 2 crores. Such insurance policies are termed as 2-crore term plans. In case of any unfortunate mishap during the plan tenure, your designated beneficiary will receive the amount.
Why purchase a 2-crore term insurance?
2-crore term insurance provides your beloved family members with a financial shield during challenging circumstances. While deciding on the sum assured amount, you must ensure that this amount can closely replace your income and pay off the debts in your absence in the future.
To ensure a better understanding, you must critically calculate your HLV and then decide on the final amount of the sum assured.
How does a 2-crore term plan work?
An individual of 28 years, earning INR 960000 per annum is supposed to get married and purchase his first house. As he knows that he will incur a home loan shortly, he decides to buy a 2-crore term plan with a 30-year tenure. At 40 years of age, he experienced a fatal heart attack, leaving back his wife and child along with the home loan. The insurance payouts act as a financial safety net to continue the child’s education and pay off the loan.
Benefits of 2-crore term insurance
Some of the significant advantages of purchasing a 2-crore term insurance include:
- High coverage spans at cost-effective premiums: The premiums of term plans are comparatively much more budget-friendly. If you compare term insurance with other forms of insurance plans, you will know this difference easily.
- Flexibility in the payment of premiums: Most term insurance providers allow ample flexibility in clearing the premium dues. You can pay it according to your convenience following the terms of the chosen plan.
- Customisation: Term insurance plans allow the facility to customise the basic plan by adding befitting riders to it. This may enhance the overall coverage span according to your convenience.
- Tax benefits: 2-crore term insurance qualifies for tax benefits for the premiums paid and the payout amounts under Section 80C and Section 10 (10D) of the IT Act of 1961 subject to terms and conditions. This can be done yearly till your plan is active. It also includes deductions for the premiums for riders.
How do you choose the correct 2-crore term insurance?
Purchasing the right 2-crore term plan when the market is loaded with so many products is quite challenging. However, the primary key is to compare term insurance products with each other to understand which will suit your needs the best. Some significant aspects that you need to consider in this respect include:
- Premiums: One of the best benefits of term plans is that they offer high coverage, maintaining cost-effectiveness. Before zeroing in on one plan, you must critically compare the premiums charged by several competent plans.
- Claim settlement ratio: This signifies the ratio between the number of claims raised versus the number of claims settled. The higher this ratio the better. It ensures a greater possibility of claim settlement.
- Riders: The riders offered vary from one insurer to another. You can enhance the overall coverage span of your chosen term insurance by adding befitting riders to it. Ideally, you should go for the one that offers the most suitable combination of riders according to your needs. Some popular riders include the Return of Premiums rider, Disability riders, etc.
Conclusion
2-crore term insurance is ideal for young individuals, sole breadwinners in the family, young parents, individuals who are working under extreme circumstances like refineries, factories, etc., and individuals with a serious medical history. Before buying, you must consider your age, past medical records, riders, and your basic lifestyle.