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How Much Does a 5 Crore Term Plan Cost?

dateKnowledge Centre Team dateJanuary 12, 2021 views116 Views
How Much Does a 5 Crore Term Plan Cost?

Term insurance is a need in your financial world akin to the need for water in life. Term insurance allows your family to survive the worst that life can throw at them and maintain their financial wellbeing. However, like everything else except air, it costs money. Though, how much is the real question.

How Much Life Cover Should You Have?

One of the primary factors that determine the cost of your life cover is, ‘how big a cover you need?’ The price of a base life cover of Rs. 1 crore should realistically be lower than a cover of Rs. 3 crores.

So, the question is – how much term life cover do you need? Ideally, you can estimate it based on the following factors:

  • Money required today to take care of your dependents’ life and regular expenses for the next 30-40 years (depending on your current age)
  • The money you should invest today to meet the important life goals of your children and dependents; for example, children’s higher education and wedding costs
  • How much financial liability you have as of now; including, home loans, car and business loans
  • Final expenses for rites and transfer costs

Usually, this amount comes about 10 – 15 times your annual take-home income. If you stretch your finances a bit, the total amount can go up to 20 times your take home figure. However, you can comfortably take an amount that is 15 times your current annual income.

Thus, if you are earning Rs. 20 lakhs a year, you can choose for a term cover of Rs. 3 crores. You will need to have an annual income in excess of Rs. 30 lakhs to consider a life cover of Rs. 5 crores.

How Much Does Term Insurance Cost?

The cost of term insurance coverage may vary based on multiple factors, even from one life insurer to others. The cost of Rs. 5 crore term cover with iSelect Star term plan from Canara HSBC Oriental Bank of Commerce Life Insurance would be as follows:

  • If you are 30 years old, non-smoking male, your annual premium will be about Rs. 42,000, or Rs. 3800 per month
  • If you are a 30 years old, non-smoking female, your annual premium for the same cover will be Rs. 36,000 or Rs. 3200 per month

These are base premium cost only for life cover benefit. In case of diagnosis of Terminal Illness or on occurrence of death, whichever is earlier, sum assured on death is payable.

You can choose from a wide range of benefits that are offered by iSelect Star Term Plan. Based on your choices the premium may increase marginally. Some of the most useful additional benefits you should include in your term plan are:

  • Accidental disability premium waiver benefit
  • Accidental disability cover for financial support in case of severe disability
  • Life cover for the spouse, especially when they are a homemaker
  • Allocate a portion of your total sum assured to regular income pay-out option

Other Factors Which Can Affect The Premium

Apart from the regular benefits, amount of cover and your age, there are many factors that determines your final term insurance premium. Most of these factors are in your control and, in fact, depend on your choices, while others may be completely out of your access.

Following factors can increase or decrease your premium outlay:

  • Policy term (PT): The higher the policy term the higher your total premium will be.
  • Premium payment term (PPT): The shorter your PPT the higher your immediate premium outlay would be. However, your total premium outflow will be lower than regular premium payment options, where PPT = PT.
  • Your existing health condition: If you have an existing medical condition or a disability, your premium would be higher than others.
  • Your Lifestyle Habits: If you are a smoker, or drink heavily, your premium for the same amount of term life cover would be higher.

While the policy term and premium payment term of your plan are in your control, the health conditions may not be. However, if you have such a health condition which warrants the insurer to increase your premium, you should consider the cover all the more.

Life insurer would only charge a higher premium when there is clearly a higher degree of risk to your life. Thus, you should secure the life cover for your family’s financial safety even if at a little higher cost.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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