Is Term Insurance Below ₹50 Lakh Enough for You?

Term insurance is one of the most reliable financial tools for safeguarding your family's future. However, determining the right coverage amount is essential. Many people assume that a higher sum assured is always better. Still, term insurance coverage of less than ₹50 lakhs can be a practical and budget-friendly choice for individuals with limited financial obligations.
This article provides a detailed understanding of term insurance policies with coverage below ₹50 lakhs, including their benefits, eligibility criteria, key factors to consider, drawbacks, and how to choose the best plan for your needs.
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How Can You Identify if Term Insurance Below 50 Lakh is Enough?
How Can You Identify if Term Insurance Below 50 Lakh is Enough?
Evaluate these factors to determine if a term insurance policy with a coverage of below 50 lakhs is suitable for your needs.
- Consider current liabilities such as home loans, education costs for children, and any other significant expenses.
- Assess the number and financial needs of your dependents. More dependents may require higher coverage.
- Reflect on whether a lower sum assured is adequate to maintain your family's current lifestyle in your absence.
- Factor in your long-term goals, such as children's higher education or marriage, which may require more comprehensive coverage.
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Why Consider Term Insurance Coverage Below ₹50 Lakh?
Term insurance below ₹50 lakhs can be a suitable option based on various factors. Here are some reasons why it may be the right choice for you:
Affordable Premiums
A term insurance policy with coverage below ₹50 lakhs has significantly lower premiums, making it budget-friendly for salaried individuals, self-employed professionals, and young earners.
Individuals with Minimal Financial Responsibilities
If you have a smaller family, fewer dependents, or limited financial obligations (such as no home loan or car loan), a sum assured below ₹50 lakhs can still provide adequate financial security.
Young Professionals & First-Time Policyholders
If you are just starting your career and want to secure your family’s future without straining your finances, a term plan with lower coverage is a good entry point into life insurance.
Best for Homemakers & Senior Citizens
Smaller coverage plans offer sufficient benefits without high premiums for homemakers and senior citizens who want basic financial security for their families.
Complementary Coverage for Existing Policies
If you already have an employer-provided life insurance policy or another term insurance plan, adding a ₹50 lakh or lower term plan can enhance your family’s protection.
People with Loans
If you have outstanding loans, it’s essential to plan how they will be repaid if you are no longer around. Adequate coverage can help clear these debts and protect your family from financial strain.
Who Should Opt for Term Insurance Below 50 Lakhs?
Young Professionals
Individuals in their 20s or early 30s who are just starting their careers can benefit from term insurance. They often have fewer financial obligations but may want to secure a safety net for their families.Newly Married Couples
Couples who have just tied the knot might want to ensure that both partners are financially secure in case of an unforeseen event. A term policy can provide peace of mind.Parents with Young Children
Parents who have dependent children should consider term insurance to ensure that their children's future is financially secure, even if one parent is no longer around.Homeowners
Those purchasing a home may want to opt for term insurance to cover the outstanding mortgage or loans. This ensures that the dependent family members can keep the house without financial strain.Limited Financial Obligations
If someone has minimal debts or financial responsibilities, a term insurance policy below 50 lakhs may be sufficient to provide coverage without overextending their budget.Budget-Conscious Buyers
Those who are looking for affordable life insurance solutions without the additional costs associated with whole life insurance policies or universal life insurance policies may prefer term insurance due to its lower premium rates.Individuals Looking to Secure Loans
People planning to apply for loans, like personal or educational loans, may benefit from term insurance. It assures the lender that the loan will be repaid in case of any untoward incident.Benefits of Term Insurance Plans Under ₹50 Lakh
Term insurance plans with coverage below ₹50 lakhs offer several advantages that can benefit certain individuals. Here’s a breakdown:
Lower Premium Costs
One of the most appealing aspects of these plans is their affordability. Since the coverage amount is lower, your premiums are also reduced. This makes it easier for budget-conscious people to secure insurance protection without stretching their finances.
Easier Access for Younger Individuals
These plans usually have simpler eligibility requirements, making them more accessible for younger people or those with fewer financial responsibilities. If you’re just starting your career or have just begun to build your financial portfolio, these plans can be a great way to get insured.
Optional Add-Ons (Riders)
Many insurance companies offer the option to include additional riders, such as coverage for an accidental death benefit rider or a critical illness rider. This means you can enhance your basic policy and get extra protection without a large increase in your premium costs.
Basic Financial Support for Your Family
Even if the coverage amount is lower, it still provides essential financial support for your loved ones if something happens to you. This ensures your family has funds to help them through tough times.
Why Choosing Term Insurance Below ₹50 Lakhs May Not Be Enough?
Living Costs
The cost of living has increased significantly over the years. Opting for term insurance with a payout below ₹50 lakh may not be sufficient to support your family for more than a few years, especially if they depend entirely on your income.
Let’s understand this with a practical scenario:
Imagine you are the primary breadwinner, earning ₹10 lakhs annually. Your family has ongoing expenses of approx ₹5-6 lakhs per year. You have existing home loans and potential future education expenses for your children. A ₹50 lakhs or lower insurance cover might get exhausted within 8-10 years.
Children’s Education
Higher education costs in India and abroad are skyrocketing. ₹50 lakhs may not even cover a child’s education or other expenses.Medical Emergencies
Healthcare costs are rising rapidly. Without health insurance, a significant portion of the payout could be medical expenses.Impact of Inflation
Inflation reduces the purchasing power of money over time. A sum assured of ₹50 lakhs today may only be worth a fraction of its value 10 - 20 years later. For instance, if inflation averages 6%, the real value of ₹50 lakhs will be halved in about 12 years.Insufficient for Clearing Liabilities
If you have loans such as a home loan, car loan, or personal loan, ₹50 lakhs may not be enough to clear your debts while leaving sufficient funds for your family’s living expenses.Limited Protection for Long-Term Goals
Families often have long-term financial goals, such as buying a house, saving for children’s marriages, or securing retirement. A smaller coverage amount may derail these plans in your absence.FAQs about Term Insurance Coverage Below 50 Lakh
Is ₹50 lakh enough for term insurance?
Why are term insurance policies with coverage below ₹50 lakhs cheaper?
Can I upgrade my coverage later if I have a term plan below ₹50 lakh?
Are there any tax benefits for term insurance plans below ₹50 lakhs?
What happens if my family’s needs exceed the sum assured by my policy?
Should I add riders to a term insurance plan below ₹50 lakhs?
Who should consider term insurance below ₹50 lakhs?
How does inflation affect a term insurance plan below ₹50 lakhs?
What should I do if my current plan is insufficient?
Is it better to opt for a shorter term with lower coverage or a longer term with higher coverage?
What happens if I stop paying premiums for a term insurance plan?
How do I file a claim for a term insurance policy?
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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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