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Annual Income (In Lacs)

What is a 5 Crore Term Insurance Plan?

Saving money to build a corpus is a great way to plan for your future. This method is definitely useful in creating wealth, albeit, in the long run. What if, life has some other plans for you? Risks to life and health do not come with advance notification.

Term life insurance is the most reliable way to financially safeguard your family with a huge corpus irrespective of when the almighty comes calling. The family can still sustain and children can continue education as you had planned and envisioned.

Besides this reason, savings can go haywire when there are financial and health emergencies. Having a comprehensive term insurance policy that gives a guaranteed sum assured and additional benefits in case of accident or total permanent disability is highly recommended.

Ergo, life insurance should also be a constituent of your portfolio in addition to savings, investments, gold, real estate and other asset classes. A 5 crore life insurance policy premium is affordable and you must seriously explore buying this policy. So, which is the best term insurance plan for 5 crore?

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 offers the death benefit to the nominees 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 offer long tenures.

Will a 5 Crore Term Insurance Plan be Enough for your Needs?

Calculate your current and projected expenses at different life stages. Look at your current income which forms the base while calculating the maximum sum assured for any term insurance policy. If you are drawing around Rs 30 Lakhs per annum, the Sum Assured should be 15 times your annual income, i.e., about Rs 4.5 Crore.

In this case, a Rs 5 Crore cover is essential to help your family stay afloat for 15-20 years by when the children may grow up or your spouse may be skilled enough to find alternate sources of income.

However, if your salary is around Rs 20 Lakhs per annum, the insurer may recommend a cover of Rs 3 Crore, unless you have a strong case to still avail a Rs 5 Crore life cover.

Let us consider an example. Suppose you are a 35-year-old male earning 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.

Six Reasons to Buy a 5 Crore Term Plan

You can have multiple reasons to buy a five crore term plan. Some of the important reasons would be as given below:

  • 1

    Dependent Parents and Spouse/Children

    You are now married, have kids and are trying to settle down in life. But no one knows what the almighty has planned. A substantial corpus in the form of life insurance can be useful in helping the family stay afloat in case fate decides to snatch you away from them.

  • 2

    Earlier the Better

    A 5 Crore term policy is cheaper when bought earlier. Purchasing at 35 will work out cheaper as compared to buying at 45. The premium increases significantly with age. Moreover, you run the risk of remaining uninsured for that long. Understand why should you buy a term plan early.

  • 3

    Health

    For younger applicants, some insurers may not mandate a health check-up (prior to policy issuance). However, if it comes to that you should undergo a health check to avoid policy cancellation later. Health check-ups, for older applicants, are almost a mandatory prerequisite. If you happen to have some ailment then, the insurance company may either refuse a policy or may substantially increase the premium.

  • 4

    Inheritance

    If you are 30, you may pay a premium of Rs.4,000 per month to avail a life cover of Rs.5 Crore. If you pass away at the age of 68, your family will benefit from the inheritance of Rs.5 Crore. Instead, if you invest Rs.4,000 per month in a fixed or recurring deposit, offering a 5%-7% rate of interest, you may, at best, accumulate about Rs.1Crore-Rs.1.5 Crore. Ergo, this plan can also work as a good investment to create an inheritance for your children.

  • 5

    Loans

    If you have availed of secured loans, the lender may attach/auction the asset to recover the dues. A Rs 5 Crore life insurance policy can help your family clear such dues and still lead a reasonably comfortable life.

  • 6

    Tax Benefits

    Save money, otherwise payable in taxes, by investing in life insurance policies. The term insurance premium up to Rs. 1.5 lakhs is deductible under section 80C of the Income Tax Act.

How to Find the Best 5 Crore Term Insurance Plan?

There are multiple channels to explore and buy insurance policies. The best 5 crore term insurance plan would include at least some of the following benefits and features:

  • 1 Option to increase cover without buying a new term policy
  • 2 Default cover for critical illnesses like cancer, heart failure, etc.
  • 3 Option to pay the benefit amount as regular income after a claim
  • 4 Option to provide a growing regular income after the claim
  • 5 Added benefits for disability and accidental death

More than that, you can look for the claim settlement ratio and capacity of the life insurance company. A good ratio and strong solvency would mean your family will have an easier time receiving the settlement in the case of a claim.

Why Buy Term Plans from Canara HSBC Oriental Bank of Commerce Life Insurance?

The term plan offered by the company provides all the features you want in your term plan and more. You can opt for a joint policy along with your spouse which makes the combined policy cheaper than buying two separate policies.

Another unique feature is the return of premiums option which gives you more peace of mind because you know you will not only get protected but also get all the money back. Additional riders to cover accidents, disabilities etc make the policy an all-around protection plan.

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.

A Rs 5 Crore Term Insurance policy is not a fancy amount but a harsh necessity in today’s world that is facing severe inflation, economic uncertainties and challenges in healthcare.