Posted by Term insurance is a pure life insurance product devoid of any investment or savings component. It offers a death benefit to the nominees or the beneficiaries upon the death of the policyholder, provided he/she is the insured individual.
These plans are comparatively much more affordable than other life insurance products. Moreover, it proves to be more reasonable when purchased early. To enjoy identical coverage, you need to pay an enhanced premium amount as the associated risks increase with age.
What is a 2 Crore term insurance?
If you purchase a 2 crore term insurance plan for yourself, it means that the optimum sum assured limit is up to 2 crores. If you pass away during the plan term, your designated nominees or beneficiaries. It will not offer any survival or maturity benefits if you outlive the plan.
A 2-crore term insurance allows substantial financial protection for the dependent family members despite your absence. This sum can either be in a lump sum or a fixed sum at a regular pre-defined frequency. It can be utilized to pay off outstanding debts or loans, run family expenses, fund children’s education and/or marriage, etc.
Multiple-term insurance plans allow you to expand the coverage extent of the basic plan by adding suitable riders to it. Some of the popular riders used include accidental death benefits, critical illness coverage, premium waiver benefits, etc.
Ideally, the term insurance coverage should be 15 times your current annual income. Considering all the aspects, including future inflation, you must choose ample coverage protection to ensure sufficient cushion for your family members.
In that context, a 2-crore term insurance seems to be ideal. However, a 1 crore term insurance plan is the most popular in this genre.
How does a 2-crore term insurance plan work?
A term policy investment is a typical signature of a healthy and wise financial portfolio. It allows insurance coverage protection and financial security to your beloved family members under challenging circumstances. The working strategy of this sort of insurance includes:
1. Sum assured: This plan allows a 2-crore death benefit to the beneficiary once the policyholder, who happens to be the insured, passes away during the plan tenure, as per the policy terms.
2. Policy term: To ensure active coverage, this sort of plan maintains a specific term chosen during plan purchase.
3. Premium: Depending on their individual preference, budget, and convenience, the policyholder decides the premium frequency, tenure, etc.
4. Death benefit: As this is a term insurance, the beneficiary receives the death benefit of INR 2 crores.
5. Maturity benefits: If the insured individual survives the plan term, he/she will receive no maturity benefit.
6. Riders: You can enhance the coverage extent by adding befitting riders to it and paying additional premiums for all the riders included.
Is a 2-crore term plan suitable for young investors?
It is best to invest in term plans at the beginning of your career while you are still young and the family responsibilities are still on the lower side. Once the sum assured amount for the term plan is decided, it remains unaltered throughout the course. Therefore, it is best to ensure ample coverage, considering your lifestyle, budget, and financial goals.
The premium payable for a 2-crore term plan will be increased if you purchase at the age of 45 years compared to the same purchase at 30 years. The premiums tend to rise with age as the associated risks and liabilities rise.
If you purchase a 2-crore term plan at 30 years of age for 30 years while maintaining a healthy physical status, your annual premium payable amount will revolve around approximately INR 25000.
If anything happens to you during the plan tenure, your designated nominee or beneficiary will receive the sum assured amount as the death benefit.
However, if you outlive the plan tenure, neither you nor your family members will receive any benefit from a term plan.
Factors to consider while choosing the right term plan
While choosing the correct term plan amidst such a host of plans in the market, you need to consider these factors to ensure a safe and profitable deal:
1. Critical assessment: Critically assess your financial objectives which is a significant determinant in deciding your ideal coverage amount.
2. Financial liabilities: Consider all the financial obligations like mortgages, debts, loans, etc. Your term coverage must sufficiently cover all these dues.
3. Health and lifestyle: Poor health and unhealthy lifestyle habits like smoking, drinking, etc. tend to raise the premium payable amount.
4. Estimated working years: Try to estimate your total number of working years before retirement. Try to achieve the majority of your financial goals by this time and plan accordingly.
5. Use HLV calculator: A Human Life Value calculator is a useful tool for quantifying your total economic contribution towards your family, considering your age, income, expenses, investments, debts, liabilities, etc.
Conclusion
If purchased young, a 2-crore term insurance proves to be affordable for a young professional as the premium payable amount remains comparatively lower on an early purchase without compromising on the coverage extent. It is highly beneficial to ensure financial security for the family members in future despite challenging circumstances.