You can define a 1 crore term plan as a protection plan that offers substantial financial coverage of INR 1 crore. The high sum assured helps to build reliable financial protection, which kicks off in the policyholder’s absence. 1 crore would help them to meet their immediate and upcoming expenses. It would prevent them from dipping into their savings or emergency funds and remaining financially independent in the absence of their primary breadwinner. However, several other factors should be weighed before you purchase an insurance product. To begin with, you should explore its features and benefits.
How will a 1 Crore Term Plan Work for You?
Let’s check the following example to understand how a 1 crore term plan works. Suppose Nikhil bought a term plan insurance at 53 years old and named his wife as the nominee. He bought the policy with a cover of 1 crore. Unfortunately, after 8 years he loses his life in an accident. Following his sudden death, his wife files a claim. After verification, the insurance company disburses a sum of Rs. 1 crore to her. This amount helped her to meet immediate expenses and pay for existing and upcoming liabilities such as loans, EMIs, etc. It allowed her to pay off obligations without straining savings or dipping into retirement corpus.
What Makes a 1 Crore Term Insurance Beneficial?
The following add to the benefits of 1 crore term insurance –
Effective planning
A robust coverage and substantial sum assured can help shape your financial planning. It will help you build a financial safety net and focus on other core aspects of your financial and investment goals. However, in this journey, you need first to determine the amount of money you would need to account for expenses and build a financial safety net for your family members to depend on in your absence.
To determine the suitable corpus, first, you need to factor in variables such as your current income, cost of living, present liabilities, future obligations, and upcoming financial goals. Additionally, you are recommended to factor in the current and projected rate of inflation to build inflation-adjusted financial cover.
This will help ascertain the financial liabilities you would leave behind for your dependents. Based on the insight you can tweak your financial needs, and protection coverage, and explore other investment instruments.
Term insurance plans are typically pure protection plans. They do not offer any maturity benefit as such. This is why they often come with affordable premiums. For this exact reason, you can avail a 1 crore term insurance plan at an affordable premium amount. This makes the high-value plan accessible and ensures that individuals who could actually benefit from such protection cover can actually afford it. However, you must note that the plan’s ultimate premium would also depend on your personal and financial variables. For instance, your age, income, coverage needs, existing covers, lifestyle habits, health conditions, etc. would influence your premium. For instance, your existing cover would tell you how much additional support your family would need in your absence.
Flexibility to increase add-ons
Riders are additional coverage benefits that you can add to your existing plan. It is designed to help customize coverage and make insurance products like regular or NRI life insurance plans more effective. For instance, you can add one or more riders like accidental death benefit, critical illness cover, premium waiver, etc. to customize the plan as per your needs. However, you should note that adding riders will inflate your premium. Hence, use a premium calculator to understand your paying capacity and add only those riders you need the most.
Build financial security
The high sum assured can extend financial security to multiple dependents. This will act as a buffer that will help your family to bounce back on their feet during an emergency. It will help the dependents to account for expenses such as cost of living expenses, wedding expenses, debt, EMIs, etc. This will help them remain independent and allow them to focus on their immediate and upcoming obligations.
Tax benefits
The premium you will pay for Rs 1 crore term insurance would be eligible for tax relief under Section 80 C of the Income Tax Act of India. Under this tax provision, you will be able to claim a maximum of Rs. 1.5 lakh as exemption. Additionally, the death benefit is tax-free under the tax provision of Section 10(10D).
Should You Purchase a 1 Crore Term Plan?
Given the rapid rise in the cost of living, it is important to build a robust corpus for the future so that your dependents can lead a carefree life in your absence. If you have multiple dependents a sum assured of 1 crore would act as a buffer and help them meet cost of living expenses and retain their standard of living. They will also be able to pursue their respective goals without straining their resources or seeking external financial help. To understand whether a 1 crore term plan is suitable for you, check the features of the plan and read the clauses carefully.
What Should You Consider When You Get a Term Insurance Policy?
Many people focus more on the high sum of 1 crore and rarely check additional features. However, you are encouraged to avoid this and know more about key features such as tenure, payout options, premium frequency, exclusions, and more. In addition, check the insurer’s claim settlement ratio and solvency ratio. Notably, the exclusions and claim settlement ratio would suggest how well the insurer can settle your claim. A high claim settlement ratio of over 90 suggests that the insurer has settled most of the claims it received in a financial year. You can check this ratio on the insurer’s official website.
These features and benefits make a 1 crore term insurance plan beneficial in many ways. However, you must learn about the exclusions in detail to understand whether the plan suits your needs or not. Subsequently, find out the process to apply and the required documents to streamline the process.