When it comes to monetarily securing your loved ones, the best choice is a term insurance. It gives you a high sum assured with a low premium so that your loved ones are safe even if you depart, leaving them behind. With so many options at hand, deciding between a 1 crore and a 2 crore term insurance plan becomes tiring. We are going to make it easy for you so that you can make the correct decision.
Understanding Term Insurance
Term insurance is one of the categories of life insurance that provides coverage for an individual for a limited time. On the death of the policyholder, within this time, the nominee gets a lump sum amount to be paid as the sum assured. Term insurance is not a mature benefit-providing policy like the other life insurance plans, thus, it is a pure protection policy.
The primary purpose of term insurance is to provide your family members with financial security. It protects them in continuing their lifestyle, paying loans, and meeting future expenses like education or a wedding, even after their death.
Why Does the Sum Assured Matter?
The amount assured in term insurance is expressed as the amount that covers your family in case of death. The selection of the appropriate sum assured depends on the extent to which your family’s financial requirements will be catered to.
For instance, a 1 cr term insurance may seem sufficient at first glance. However, rising inflation, increasing expenses, and longer life expectancies mean that this amount might not stretch as far as you’d hope. On the other hand, a 2 crore term insurance offers double the coverage, but at a higher premium.
Factors to Consider When Choosing Between 1 Crore and 2 Crore Term Insurance
- Family Financial Needs: Keep in mind your family’s current and future expenses. They include daily expenses, EMIs, school fees, higher studies, hospital expenses, and retirement fund for your wife. Your family might need a 2 crore term insurance if they have more financial responsibilities.
- Current Debts and Commitments: If you have huge loans such as a house loan, car loan, or business loans, an increased sum assured will safeguard your family from the repayment burden. Having 2 crore term insurance in such a situation can provide you with that additional peace.
- Inflation: Money depreciates over time due to inflation. A 1 crore sum assured will perhaps not be so valuable in 20 years. With a 2 crore term insurance cover, you keep your family’s purchasing power intact to a larger extent.
- Your Income and Lifestyle: Your choice should be according to your current lifestyle and income. If your family has been enjoying a comfortable living, a higher sum assured will help them carry on in the same manner without compromising their needs.
- Premium Affordability: The Premiums of a 2 crore term insurance are higher than the premiums of the policy of 1 crore term insurance policy. Ensure that the premiums are not expensive and do not affect your economy. Some insurers offer flexible payment options where larger coverage is made affordable.
Ideal Features of 1 Crore Term Insurance
- Low Premiums: A 1 crore term insurance policy is a low-premium policy to protect your family’s financial status.
- Enough for Average Needs: This might be enough if your family’s financial requirements are average.
- Beginner Level Protection: It’s a good starting point for freshers who prefer not to lock in too much at the entry level.
Major Advantages of 2 Crore Term Insurance
- Doubled Protection: Your family receives twice the financial protection through 2 crore term insurance.
- Future-Proofing: Higher protection guarantees that your family’s demands are taken care of even after decades.
- Better for High-Income Earners: If you are a high-income earner with more dependents, this cover is best suited.
Common Myths about Higher Coverage
- “It’s Too Expensive”: Owing to insurers competing with one another, premiums on term insurance have never been cheaper. Moreover, the longer policy duration will help in spreading it out.
- “I Don’t Need That Type of Coverage”: Better safe than sorry while estimating your family’s future needs.
- “I’ll Buy It Later”: The sooner you buy, the less your premium. Waiting can result in higher charges or even rejection if your health declines.
Hints on Choosing the Appropriate Plan
- Read various financial objectives: Think about short-term objectives and long-term objectives like children’s education, wedding, and retirement.
- Use Online Calculators: Practically every insurer has online calculators to arrive at an approximate amount of sum assured that would be appropriate for your profile.
- Compare Policies: Compare various term insurance plans and try to choose the best coverage-to-premium ratio plan.
- Seek Professional Advice: If you are in a dilemma, consider the advice of a financial professional to guide you to make the correct choice.
Conclusion
Both 1 crore and 2 crore term insurance plans have their own merits, and you can choose. If your family’s requirements are short-term and you are tight-fisted on budgets, a 1 crore policy is an apt hedge. But if your responsibilities are greater, you have huge loans pending, or you wish to protect yourself against future inflation, a 2 crore term insurance plan is the optimal choice.
Remember. The security and peace of mind that you have for your loved ones for the price of term insurance. By having a responsible plan for your loved ones’ needs, you will be able to ensure that you are making the right decision that is most appropriate for your family’s future goals.
