A Term plan is a type of life insurance plan that provides life coverage, protecting the policyholder’s family members. In case of the policyholder’s sudden demise, their beneficiaries will get life coverage, which includes a predetermined amount as death benefits. Due to the non-involvement of a cash component, it offers an affordable premium amount, mainly for those with pre-existing medical conditions. Hence, a term insurance plan offers financial stability during financial crunch due to medical expenses.
Many individuals look for a 2 crore term insurance plan as a sum assured for their family, which will offer substantial security coverage, while keeping the plan budget-friendly. But whether a 2 crore sum assured is enough or not depends on certain factors, such as present income, desired lifestyle, liabilities, & future financial objectives. While exploring different options, it is advised to compare all the plans available that offer the required features. Additionally, the Best Term Insurance Plan for 2 Crore should be such that it aligns well with your future financial obligations & financial responsibilities.
Is 2 Crores the Right Coverage for Your Needs?
Normally, it is advised to have a sum assured of 10 times your annual income in case of a term insurance, & sometimes it is said to be 20 times. Further explaining, some factors are provided that should be considered while assessing whether a 2 crore term insurance plan is enough or not.
- Dependent Family Members & Living Expenses:
The number of dependent family members can provide a rough idea of how much funding would be required to meet the future livelihood, maintaining the present lifestyle. Make a list of the recurring expenditures incurred, along with other short-term financial obligations. Additionally, looking for the number of dependent family members will also help you assess whether an INR 2 crores sum assured would be enough or not.
- Understand Your Financial Liabilities:
Assess the current financial liabilities, such as outstanding loans or debts, along with the future financial obligations, such as a child’s education or marriage. Considering all these expenses, ascertain whether INR 2 crores of sum assured would be enough or not, taking the inflation factor into consideration.
- Your Annual Income & Retirement:
Assessing your present annual income & whether you have enough retirement funds saved will help you assess the amount of sum assured. In the case of young policyholders, who have fewer financial responsibilities, a term plan having life stage benefits will best suit them, allowing them to increase the amount of sum assured. On the contrary, in the case of older policyholders who already have a retirement fund & have no dependents, a higher amount of sum assured would not be required.
- Human Life Value (HLV):
Human Life Value is a financial metric that is used to calculate the economic value of an individual’s life. In other words, it can be treated as the current value of all the future incomes, savings & contributions less the personal expenses & applicable taxes to assess the amount of financial assistance that they can provide to their dependents. The process can further be simplified by using a Human Life Calculator to assess the amount of sum assured.
- Account for Inflation:
The cost incurred to achieve your financial objectives keeps increasing due to the inflation factor. Hence, the payouts to be received should also be paced up to be considerate to help achieve the financial objectives of the family members.
Steps to Choose an INR 2 crore term Insurance Plan
Provided are the steps to be followed to choose an INR 2 crore term plan:
Step 1: Assess Your Needs
Assess the future financial obligations, future objectives, liabilities, & future expenses, such as a child’s education or spouse’s retirement expenses, etc. Under normal circumstances, it is advised to have the sum assured at least 10 times your annual income.
Step 2: Use a Term Calculator
Next, use a Term Plan Calculator to estimate the premium amount depending on certain factors, such as lifestyle, policy tenure, age, etc. This calculator can also be used to compare different available calculators to ascertain the sum assured.
Step 3: Compare Available Plans
Using different comparison tools, make a comparison of the available 2 crore term plans depending on their features, premiums, benefits, etc. Additionally, look for additional features, such as flexible payouts, return of premium benefits, etc., ensuring you select a plan that best suits your financial needs.
Step 4: Check Claim Settlement Ratio
Select the insurer with a high claim settlement ratio, which ensures the claims will be settled, thus helping the insured make a wise decision.
Step 5: Review Additional Riders
Consider if the plan offers any additional riders, such as a critical illness rider, waiver of premium rider, accident death benefit rider, which will enhance the 2 crore term plan at some added cost.
Step 6: Choose the Policy Tenure & Premium Payment Term
Select a policy tenure that best aligns with your future financial obligations & objectives. Additionally, select a premium payment term, i.e. monthly, quarterly, semi-annually, or annually, depending on the financial situation.
Step 7: Check the Documentation
Submit all relevant documentation required, such as income, address, & identity proof, to complete the application process.
Conclusion
As a term plan plays a vital role in our lives, starting early, comparing plans, & prioritising the family’s well-being will help you make an informed decision. The term plan that provides a sum of INR 2 crore is becoming quite popular amongst buyers as it offers affordable premium rates along with financial support in times of distress. It is a huge amount that will help you beat the inflation factor, sustain a premium lifestyle, & achieve financial safety in your absence. But it will not offer you anything if you survive the policy tenure. Thus, it helps in providing mental peace & financial security to your family members in your absence.
