With rising inflation and uncertainties, it has become more important to safeguard your family’s future and plan in advance. Life is surely uncertain but does that mean we cannot be prepared?
Well, as we go along, there could be risks to your life and health and to that of your family members. The key purpose of buying in a term insurance plan is to make sure that your family has enough money to lead a satisfactory, peaceful life if you were to meet an unfortunate incident.
Even if you start saving early and build a corpus for yourself, say of a few lakhs, but do not have a sufficient insurance coverage, all your efforts can come to nothing in case you are diagnosed with a terminal illness, or have to be hospitalized following a major accident, or, worse still, in the event of your death.
Therefore, securing yourself and your family members from such unprecedented risks is an equally important part of creating wealth for a secure future. However, a valid question to ask here is how much coverage is adequate? Read on to find out –
What is a 5 Crore Term Insurance?
A 1 Crore life insurance cover has been a popular number among insurance buyers. However, 5 Crore life insurance is slowly taking over its popularity. A life cover of 5 Crore guarantees to pay for the liabilities of the family and can help fulfill their lifestyle requirements in absence of the bread earner.
A policy that offers to pay a 5 Crore cover, makes the payment to the beneficiary of the insured, in the event of an unfortunate demise of the policy holder during the tenure of the policy. The best part about term plans is that they are a low-cost, high-cover options that come with long tenures. In fact, you can also save a lot more when you buy your insurance policy online.
Considering, an eight-figure number is sufficiently large to cover your family’s entire requirement, but most of us buy it without doing the basic math. Let’s find out how much insurance cover is actually sufficient.
How much Life Insurance is enough Life Insurance?
Life insurance is not about assigning a value to your life; after all, life is priceless. The easiest way to calculate you’re a sufficient life cover for yourself and your family is to multiply your annual income or family’s expenses by 10. So for instance, if your annual income is Rs.10 lakhs, you should opt for Rs.1 Crore cover.
The other method of calculating life cover for your needs is called the ‘human-life-value’ method. Here, you need to consider the value of all your future income, exclusive of your personal expenses, EMIs and life insurance premiums and taxes, till the age you retire, ideally 60.
Take this example, considering you are a 35-year-old male with an annual salary of Rs.10 lakhs. You have to make arrangements to provide finances for your family for up to 25 years (retirement at 60 years). Assuming your annual expenses, all inclusive are 2.5 lakhs, your family will face a shortfall of Rs.7.5 lakhs. Now, if this shortfall is calculated for 25 years at an expected rate of 8.5% per annum (factoring in inflation at 6%), then the ideal cover for you should be Rs.1.4 crore.
A Term Insurance Plan for 5 Crores
A variety of insurance products are available in the market, but the strategy should be to keep things simple yet all inclusive. So, get an insurance cover that offers maximum coverage at the lowest cost, so that you are left with some cash to invest and make your money grow.
Some people suggest one must avoid insurance-cum-investment products since the charges are more. However, it may not be true for someone who wishes to achieve multiple goals of wealth creation and life coverage. Finding a balance is the key.
While a term plan like the iSelect Star Term Plan by Canara HSBC Oriental Bank of Commerce Life Insurance can offer a large cover at lower premium rates, a Unit liked plan like the Invest 4G can be beneficial when it comes to saving for long term goals, apart from family’s financial security.
|iSelect Star Term Plan||Invest 4G ULIP|
|Entry Age||18 years – 65 years||Whole of Life Option: 18 years – 65 years|
|Other Plan Options: 18 years – 50 years|
|Age at Maturity||28 years – 80 years||Life Option: 23 years – 80 years|
|Life Option with PFB: 28 years – 80 years|
|Policy Term||Plan Option Life: 5 years – 62 years||Life Option: 5 years – 30 years|
|Life Option with PFB: 10 years – 30 years|
|Other Plan Options: 10 years to 30 years||Whole of Life Option: 99-Age at entry|
A term insurance policy has several roles to play in the long-term well-being of your loved ones. It also works as an income replacement in case of the insured person’s demise. Moreover, a term insurance of 5 Crore can be an asset that helps take care of future liabilities like repaying of loans, maintaining regular lifestyle, funding your child’s higher education, and much more.
However, you must remember that buying an insurance cover early in life helps you acquire a greater coverage at a lower cost. So, do not procrastinate and plan your future right away!
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