What you need to know about 1 crore term life insurance

A 1 crore term insurance is a protection plan that offers a sum assured of Rs.

1 crore to the policy nominee in case of unfortunate death of the insured under a situation covered by the plan. By providing access to a higher sum assured amount, the insurer extends reliable financial protection to the policy dependents. The high cover amount helps the insured ensure that the dependents are financially stable and capable of meeting sudden expenses even in the absence of the insured. This way the 1 crore term life insurance acts as a financial safety net for the dependents and offers individuals peace of mind when it comes to ensuring the financial well-being of one’s loved ones.

Hence, individuals planning to get a term plan may consider a Rs 1 crore term life insurance plan to safeguard their family’s future financial standing and build support for them. In addition, they must explore the policy and its features to know about its scope better.

How does a 1 crore term insurance plan work?

Let’s take a look at the example below to understand how a 1 crore term insurance works –

Ravi purchased a 1 crore term life insurance plan when he turned 30 years old. When signing the policy document, he chose a 30-year tenure and named his wife as his nominee. Unfortunately, six years later he lost his life due to an accident. Following his untimely demise a claim was raised by the nominee and subsequently, the insurance company disbursed the sum assured of Rs. 1 crore to Ravi’s wife. The substantial amount helped the policy nominee to meet immediate expenses and helped her get back on her feet and lead a financially independent life with dignity.

What makes a 1 crore term insurance important?

The following makes having a 1 crore term insurance important nowadays –

For effective financial planning

The first step to effective financial planning through insurance is to determine the amount of life cover they would require to build a financial cushion for their family. Typically, the required coverage amount depends on several factors including the policy buyer’s current income, cost of living, ongoing loans, and future obligations. Given the rapidly increasing inflation rate, individuals are also encouraged to account for inflation to ensure the coverage would be able to beat its impact. By simply factoring the historical rates and current rates, individuals can determine whether a 1 crore term insurance would be enough for their needs or not. 

Notably, term plans are designed as pure protection plans and to help individuals take charge of their family’s future. This is why most term plans can be availed at affordable premiums. Contrary to popular belief, term plans with a high cover of as much as Rs. 1 crore can be availed at an affordable premium. Insurance providers offer them at cost-effective premiums so that more individuals can benefit from their coverage, especially those with multiple dependents.  This way individuals can plan their finances as per their needs and their premium payment capacity.

To increase coverage with add-ons

Add-ons or riders help increase one’s existing coverage. These plans are designed to help individuals personalize their term plans as per their unique insurance needs. For instance, individuals looking for health insurance benefits have the option to add critical illness coverage to enhance their protection. Similarly, they may add accidental death cover to build financial protection against unforeseen incidents that could jeopardize their life.  However, it should be noted that increasing the insurance coverage would also lead to an increase in the premium. This is why individuals must check their financial capacity to understand whether increasing their premium would be a wise move or not.

To ensure consistency in premium 

The premium for a life insurance remains the same throughout the policy term, i.e., till maturity. This means no matter for how long they choose to avail of an insurance cover they will pay the same premium throughout the years or decade. This consistency allows individuals to plan their budget and eliminate their fears or concerns related to a sudden increase in the premium amount. However, it should be noted that the premium amount is decided based on the term one’s picks. 

For financial security

The high cover value can extend financial security for the entire family for their life. A high sum of Rs. 1 crore would be sufficient to allow the family to meet miscellaneous expenses such as debts, children’s education expenses and marriage, cost of daily living, and other obligations.

Tax savings

The premium paid towards Rs. 1 crore term insurance is eligible for tax benefits under Section 80C. Under this provision, individuals can claim up to Rs. 1.5 lakh as exemption. The death benefit is also tax-free under the provision of Section 10(10D).

Who should purchase a 1 crore term life insurance plan?

Given the extensive world we live in, today, individuals should consider buying at least a 1 crore term life insurance plan to build a robust safety net for their family. Such a plan would benefit individuals who are the sole breadwinner of the family and allow them to create a financial provision for their loved ones. It will help them settle ongoing debts and help pay for the policy buyer’s children’s higher studies and wedding. Additionally, the sum assured will act as a source of income by filling the financial gap left by the insured’s sudden death.

What to consider when getting a term insurance policy?

Individuals often focus on just the features of a 1 crore term insurance plan and omit key factors like the company’s claim settlement ratio and solvency ratio which tend to influence their claim process significantly.

Notably, an insurance company with a high solvency ratio is deemed capable of offering quick and guaranteed claim settlements. This way it ensures that the dependents can seek the required financial support in case of an emergency during the insured’s absence. 

Meanwhile, a high claim settlement ratio suggests that an insurance company has settled a large volume of insurance claims in a year against the total number of claims they received. It also indicates that the company follows a smooth and hassle-free claim process and does not delay the process. For these reasons, it is suggested to check both the solvency ratio and claim settlement ratio of different insurance providers and compare them to pick a company that is more likely to settle claims and provide access to claim amounts.

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