Simplifying Life Insurance in India
Term Insurance Plan for 1 Crore Online in India
Deciding to opt for a 1 crore term insurance plan is a crucial financial choice that necessitates thorough consideration. While it may be a prudent decision for some individuals, given the current lifestyle and inflation, it might not be adequate for others.
This article discusses how a 1 crore term insurance plan can fulfil the coverage needs of an average investor. It explores the key factors to consider when selecting such a policy, weighing its advantages against your financial goals and insurance requirements.
If you are considering securing your family’s future with a substantial term insurance plan, assess whether a 1 crore insurance policy suits you.
Table of Contents
1 Crore Term Insurance Plan Overview
Here’s a table summarising the key aspects of a ₹1 Crore term insurance policy:
What is a 1 Crore Term Insurance?
The term "1 crore" refers to a sum assured of one crore Indian rupees, making it one of the most substantial coverage options available in the market. Thus, a 1 Crore Term Insurance Plan assures that the nominee will receive a sum of Rs. 1 crore after the policyholder's death.
While the magnitude of this amount might initially seem overwhelming, understanding the advantages and relevance of a 1 crore term plan is crucial to making informed decisions about financial security.
Let's delve into the significance of a 1 crore term plan and why it has gained immense popularity among individuals who seek to protect their loved ones from financial uncertainty.
How Does 1 Crore Term Plan Work?
Term Insurance Plan is the essential component of any healthy financial portfolio. More than an investment option, it is a financial tool that secures your family's financial future and provides you with much-needed mental peace.
A rightly planned substantial insurance cover ensures that financial obligations like children's schooling, marriage and liabilities like home loans are taken care of, and the family does not deal with economic turmoil amidst the grief that strikes with the loss of a family member.
Let us have a look at how a 1 Crore Term plan would work:
Sum Assured: It provides a coverage of 1 Crore rupees to the beneficiary in case of the policyholder’s unfortunate demise during the policy term.
Policy Term: The policy has a specified term chosen when buying the policy during active coverage.
Premium Payments: The policyholder can choose the premium amount, frequency, and tenure according to their preferences.
Death Benefit: Since it’s a term plan, the death benefit is the sum assured i.e. 1 crores. This death benefit is paid to the beneficiary in case of the policyholder’s unfortunate demise during the policy term.
Maturity Benefit: If the policyholder survives the policy term, there is no return unless you have a Term Plan with a Return of Premium option that returns all the premiums paid on the policy maturity. There is no additional savings component in any case.
Rider Benefits: You can add riders to your policy in addition to the base plan. These add-ons provide additional coverage for situations like critical illness, accidental death, disability, premium waiver, etc.
Illustration
Let us take the example of Mr Vikram.Mr Vikram, a 35-year-old software engineer, is the sole breadwinner of a family of 4, including his wife and two kids, both kindergarteners. He has purchased insurance coverage of 1 Crore, with a term of 20 years, and his wife is the nominee for this policy.
Scenario 1: Death During the Policy Term
If Vikram passes away during the 20-year term of the policy, his nominee will file a claim with the insurance company. After successfully processing the claim, Vikram’s nominee would receive the sum assured of ₹1 crore, which would help them cover living expenses, pay off debts, or invest for future needs.
Scenario 2: Outliving the Policy Term
If Vikram outlives the 20-year term of the policy, the term plan typically does not provide maturity benefits, meaning she would not receive a payout.
Disclaimer: The above illustration is a hypothetical example created for educational purposes only and does not represent a real-life scenario.
Is a 1 Crore Term Insurance Plan Enough for You?
Factors for Evaluating Required Sum Assured
A correct evaluation of the required sum assured involves many factors:
- Family income
- Expenses
- Future goals
- Inflation
- Loans and liabilities
- Regularly increasing financial requirements of your family
A more accurate assessment can be done using the human life value calculator, which considers all the above factors.
Illustration
Consider the scenarios below to understand if a 1 Crore term plan is enough.
Case 1: Mr. Aryan
Aryan, a 26-year-old professional, had retired parents as dependents and an annual income of ₹10 lakhs. He planned to marry soon and buy a house afterwards. Foreseeing future responsibilities, he bought a 1 crore term plan with a tenure of 20 years as a financial cushion for his dependents.
At the age of 42, Aryan suffered a cardiac arrest. He had a dependent wife, two kids, an outstanding home loan of ₹40,00,000, and dependent parents. Considering these liabilities and future significant expenses like the kids’ higher education, the sum of ₹1 crore was insufficient. Aryan should have reevaluated his coverage once his responsibilities increased.
Case 2: Mr. Rohan
Rohan, a 30-year-old professional, had retired parents dependent on him. He was married and owned a family house. At that time, his annual income was ₹15 lakhs. He decided to purchase a 25-year term plan worth 1 crore.
At the age of 40, Rohan passed away due to an accident. He had dependent parents and a 6-year-old daughter. However, his wife was earning, and he had no significant liabilities, like a home loan. His daughter’s education was one significant expense that needed to be taken care of.
Rohan also had considerable savings since he was an active investor in different investment instruments. Given his fewer liabilities and more assets, a term plan of ₹1 crore might be sufficient.
Note: The one golden rule to having sufficient coverage is to “Review Your Term Insurance Every 5 Years” to cover all your increased liabilities and expenses. A periodic review of your term plan ensures it aligns with your evolving financial situation. Consider revisiting the policy if significant life changes occur, such as marriage, childbirth, or career advancements.
Benefits of 1 Crore Term Insurance Plan
A 1 Crore Term Insurance Plan provides significant financial protection for your family during your untimely demise. Here are some of the key benefits:
High Coverage at Affordable Premiums
A sum assured of 1 Crore offers substantial financial security to your family at a relatively low cost. Term plans are typically more affordable than other types of life insurance.
Financial Security for Family
Ensures that your family can maintain their standard of living and cover major expenses like mortgages, education, and daily living costs in your absence.
Tax Benefits
Premiums paid for the policy are eligible for tax deductions under Section 80C of the Income Tax Act. The death benefit received by the nominee is also tax-free under Section 10(10D).
Flexibility
Many insurers offer flexible premium payment options (annual, semi-annual, quarterly, or monthly) and policy terms. Some plans also allow you to increase coverage at major life stages (marriage, childbirth).
Riders and Add-ons
Optional riders, such as critical illness cover, accidental death benefit, and premium waiver, can enhance the coverage of your term insurance plan.
Peace of Mind
Knowing that your loved ones will be financially protected, even if you are not there to provide for them, provides peace of mind.
Simple and Transparent
Term insurance plans are straightforward, with clear terms and conditions, making them easy to understand and manage.
Loan Protection
The sum assured can be used to pay off outstanding loans, ensuring that your family is not burdened with debt in your absence.
Who Needs a 1 Crore Term Insurance Plan?
A figure of 1 Crore might look extremely high, but for any average person who lives in a city, works in a private company and has school-going kids, the financial requirement at any stage would be this.
A term plan is the most affordable way to financially secure a family for unforeseen circumstances when this income might stop due to the breadwinner's demise.
Here are the other benefits that a 1 Crore Insurance cover can provide you:
High Coverage at Affordable Premiums
Term Insurance plans are the cheapest and most affordable insurance types available. They are cost-effective because they provide only Death Benefits and have no savings component.Takes Care of Liabilities and Debts
Having a Term Plan in your financial bucket means that in case of any unforeseen circumstance when you are no longer with your family, the Term Plan will help them repay all debts and liabilities. It ensures they do not have to deal with any debts you might leave behind. With a Term Plan, you can ensure a debt-free legacy for your family.Enhanced Coverage
Compared to whole-life plans or other insurance plans with a savings component, term Plans provide much higher coverage for a given premium. You can also enhance that base coverage by adding riders who care for other specific situations. This ensures the dependent family is financially secure and can lead a normal life.
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Who Should Buy a 1 Crore Term Insurance Plan?
Young Earners
Youngsters who have just started earning and are responsible for dependents should consider a 1 Crore term plan to provide a substantial financial cushion for their loved ones in the event of their demise.Individuals with Dependent Parents
In cases where parents do not receive a pension and are dependent on their sole earning child, Term Plan should be purchased as it would save the parents from any financial turmoil in case of any unfortunate death of their earning child. The insurance cover would take care of their liabilities and regular expenses.Married Couples
When you get married, there are increased responsibilities. Even when your spouse is earning, your expenses and liabilities are directly proportional to the sum of both incomes. In such a case, a term plan ensures that your spouse does not struggle with finances, even in your absence.Young Parents
Young parents must buy a term plan of at least 1 crore to secure their child's future. This will ensure that your child's education and other needs do not go for a toss if you are not there with them.Individuals with Home Loans
If you have taken a home loan and are paying off the EMIs, that loan can burden your family in case of your unfortunate demise. These days, in any city, a decent home costs at least 1 Crore. Hence, make sure to buy a Term Plan for 1 crore dedicated to safeguarding your home.Small Business Owners
If you are into business, most of the expenses are on credit, and at any given time, you might find yourself under a certain debt. If it is a small business, 1 Crore Term Insurance plan might suffice to take care of these debts in case of your untimely demise and make sure that your family does not have to deal with this pressure of debts at a time when they are dealing with a personal loss.Senior Investors
Senior people, especially those nearing retirement whose major life goals like house purchase and kids’ education are over, can look at buying a 1 Crore coverage. This will provide financial protection to their dependent spouse and others in case of their unfortunate demise and take care of any pending milestones like their children’s marriage.Individuals with Education Loans
If you have taken out an education loan, your family may face the challenge of repaying it if something happens to you unexpectedly. A term insurance policy of 1 crore can offer significant protection, assisting in settling the remaining education loan and easing your family's financial burden.How to Choose the Right Term Plan?
1. Decide a Sum Assured that is Sufficient for you
We all have our long-term goals, lifestyle requirements and other financial needs. While deciding on coverage, ensure all your financial requirements are met. Additionally, it is enough to take care of all your liabilities and other expenses in case of your untimely demise.2. Compare the Premium Rates
Choose a plan that has the most competitive premium rates. Make sure to compare the plans and choose the one that best meets your requirements at the most affordable rates.3. Check for the Benefits and Riders that the Policy is Offering
Check the plan entirely for all the benefits that it provides. Riders are an essential component because they increase the total coverage of your plan and cover specific conditions like critical illness, accidental death, and terminal illness.
Check your plan for all the rider options it provides, and pick the one most suited to your needs.
4. Check for the Exclusions and Inclusions
Another critical point to check in an insurance plan is the inclusions and exclusions. Check this list thoroughly so that when there is a need, you do not get surprised that your insurance provider does not cover the specific condition.5. Check the Claim Settlement Ratio of the Insurance Provider
Claim Settlement Ratio reflects a company's credibility, and it indicates how quickly your dependents would receive the death benefit in case of your unfortunate demise. The higher the ratio, the more credible your insurer is.
Hence, you must check the claim settlement ratio of the insurance provider before opting for a term insurance plan from them.
Things to Consider When Choosing a 1 Crore Term Insurance Plan
- Policy Term: Choose a policy term that covers your working years or until your primary financial responsibilities are over.
- Premium Payment Term: Decide on a premium payment term that aligns with your financial planning (regular, limited, single pay).
- Claim Settlement Ratio: Check the insurer's claim settlement ratio to ensure a reliable and prompt claim settlement process.
- Inflation: Consider the impact of inflation on the coverage amount. You might need a higher sum assured to match future financial needs.
- Health and Lifestyle: Be transparent about your health and lifestyle during application to avoid claim rejections later.
- Comparing Plans: Compare different plans from various insurers based on premiums, coverage, add-ons, and customer reviews.
Eligibility Criteria for a 1 Crore Term Insurance
The exact eligibility criteria may vary slightly between different insurance providers. The following table provides a general overview.
Documents Required to Purchase a 1 Crore Term Insurance Plan
To purchase a 1 Crore term insurance plan, applicants are required to submit the documents listed below:
Note: Depending on the insurance provider, each section requires one or two documents as proof.
How to Calculate 1 Crore Term Insurance Premium?
To calculate the premium for a ₹1 crore term insurance plan, you need to consider several factors such as the policyholder’s age, health, lifestyle, occupation, and the policy term. Additionally, you might want to explore extra coverage options like critical illness riders or accidental death benefits.
Let’s assume a 1 crore term insurance plan details for Rohit as an example:
- Age: 30 years
- Health Status: Non-smoker
- Policy Term: 20 years
- Sum Assured: 1 Crore
- Riders: No additional riders
Insurers calculate the base rate based on age, health status, and sum assured. In Rohit’s case, let's assume that the base rate is ₹1.5 per thousand of the sum assured. Here is how the premium is calculated:
- Base Premium = (Sum Assured/1,000) × Base Rate
- Base Premium = (1,00,00,000/1,000) × 1.5 = ₹15,000 per year
Rohit's base premium is ₹15,000 per year. This premium reflects his age and healthy lifestyle and offers him comprehensive coverage for the assured sum.
Although Rohit has opted not to include additional riders in his policy, he knows he can review and modify his options. Riders such as Critical Illness or Accidental Death Benefits can be considered if his needs change or if he wishes to enhance his policy's coverage further.
Disclaimer: The above calculations are only for illustration purposes. For an accurate calculation, it's best to use an online premium calculator provided by insurance companies or consult with a financial advisor as they consider all the specific details and current rates.
Common Reasons for 1 Crore Term Insurance Plan Rejection
1. Suicide
Most insurance policies include a suicide clause, stating that if the policyholder commits suicide within the first one or two years, the claim won’t be paid. If the insurer suspects the application is an attempt to exploit this, they might reject it.2. Participation in Hazardous Activities
If you participate in high-risk activities like skydiving, scuba diving, or motor racing, insurers may either reject your application or charge you higher premiums due to the increased risk.3. Self-Inflicted Injuries
Policies often exclude coverage for death due to self-inflicted injuries. If there's evidence that the applicant has a history of self-harm or attempted suicide, the insurer may deny coverage.4. Criminal Activities
Death resulting from criminal activities is usually not covered. If you have a criminal record, insurers may reject your application to reduce their risk.5. Substance Abuse
Abusing alcohol, drugs, or other substances increases health risks and the chance of premature death. Insurers may deny coverage if you have a history of substance abuse.6. Pre-existing Medical Conditions
Severe or multiple pre-existing conditions like diabetes, heart disease, or cancer make you a higher risk for insurers. They might reject your application or offer coverage with exclusions and higher premiums.7. War and Terrorism
If your profession or location is at high risk for war or terrorism, the insurer may deny coverage to avoid large potential claims.8. Non-Commercial Aviation
Engaging in aviation activities, like being a pilot or frequently flying in non-commercial aircraft, increases the risk of accidents. Insurers may reject your application or raise premiums if you’re involved in such activities.Tax Benefits for 1 Crore Term Insurance Policies
Section 80C: Premium Payments
Under Section 80C you can claim a tax deduction for your term insurance policy premium, up to 1.5 lakh INR annually. This deduction is available to individuals and Hindu Undivided Families (HUFs).
Who Can Qualify?
- If your policy was issued on or after April 1, 2012, your premium should not be more than 10% of the sum assured.
- The premium should not exceed 20% of the sum assured for policies issued before that date.
Section 10(10D): Maturity Benefits
Under Section 10(10D), the money you receive from your term insurance policy, including the death benefit, is completely tax-free.
Conditions:
- For policies issued on or after April 1, 2012, the premium must not exceed 10% of the sum assured.
- The premium must not exceed 20% of the sum assured for older policies.
TDS: If your policy doesn’t meet these conditions, a 5% tax will be deducted at the source if the payout exceeds 1 lakh INR in a financial year.
Section 80D: Health Riders
Under Section 80D if your term insurance policy includes extra health-related coverage like critical illness or accidental death, you can claim an additional tax deduction for the premium paid for these riders.
How Much Can You Deduct?
- If you are under 60, you can claim up to 25,000 INR.
- If you are a senior citizen, you can claim up to 50,000 INR.
- This deduction is separate from the 1.5 lakh INR limit under Section 80C.
A 1 crore term insurance plan is a crucial financial safety net. It provides a substantial lump sum to your dependents in case of your untimely demise. This coverage helps safeguard their financial future, covering expenses like education, home loans, and living costs.
While it's essential, remember to choose a plan that aligns with your needs and budget, considering factors like age, dependents, and financial goals.
FAQs about 1 Crore Term Insurance Plan
What will be my premium for a 1 crore term insurance plan?
Should I buy a 1 crore term insurance plan or an endowment plan?
What is the minimum income requirement to purchase term insurance of ₹1 crore?
What are the eligibility criteria for buying the best term insurance plan for ₹1 crore?
When should I buy the best term insurance plan for 1 crore?
How do I buy a 1 crore term insurance plan online?
What is the minimum age to purchase a 1 crore term insurance plan?
What are the riders benefits available on a 1 crore term insurance plan?
What happens to a 1 crore term plan on maturity?
How does the critical illness rider impact the overall premium and claim settlement process for a 1 crore term insurance plan?
What are the specific tax implications of a 1 crore term insurance plan?
How do insurers assess the risk profile for individuals seeking a 1 crore term insurance plan?
How does the Human Life Value (HLV) concept influence the decision to opt for a 1 crore term insurance plan?
What are the key factors when comparing different 1 crore term insurance plans?
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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