Why 1 Crore Term Insurance is a Smart Move for Middle-Class Families in India
For most middle-class families in India today, the family's future is their top priority. However, unforeseen events may occur, and having a 1 crore term insurance policy allows middle-class breadwinners to protect their loved ones during difficult times. A term insurance policy is, in fact, one of the most cost-effective solutions for ensuring the middle-class family’s financial security in the future.
Why Do Middle-Class Breadwinners Need a 1 Crore Term Insurance Policy?
A term insurance policy is a type of life insurance that offers financial coverage for a specific period. In the event of the policyholder's unfortunate demise during the policy term, the family members receive a lump sum insurance coverage amount. Here are key reasons why a 1 crore term insurance policy benefits middle-class breadwinners.
- Financial Cushion for Families: With coverage of 1 crore, families can maintain their standard of living and meet daily expenses and long-term goals, such as children’s education or marriage.
- Debt and Loan Repayments: A significant term insurance policy helps alleviate the financial burden of repaying home loans, car loans, or personal debts.
- Protection Against Inflation: As inflation erodes the value of money over time, a 1 crore coverage today ensures that the family has sufficient funds in the future despite rising costs.
- High Coverage at Low Premiums: Term insurance for 1 crore provides for a significant sum insured, cost-effectively potentially within the reach of middle-income families.
- Tax Benefits: Section 80C of the IT Act permits tax deductions for term insurance premiums of 1 crore rupees. Also, the amount received as a death benefit under section 10(10D) is generally tax-free.
Current Adoption Rates of Term Insurance in Urban India
Despite the benefits, term insurance penetration in urban India is modest. A recent survey showed that as few as 28% of urban Indians hold term insurance plans. This means ample scope exists for increasing awareness and adoption of such fundamental financial products.
Factors Influencing Term Insurance Adoption
Several factors influence the adoption of term insurance among middle-class families:
- Awareness and Education: Low intake results from a lack of awareness of the benefits or importance of term insurance.
- Perceived Affordability: There is a misconception that term insurance is costly. But in reality, these policies are designed to be cost-effective, and premiums are highly pocket-friendly.
- Trust in Insurance Providers: Lack of confidence in the insurance companies to settle claims and reliability.
How to Secure a 1 Crore Term Insurance Policy?
Obtaining the best 1 crore term insurance policy is simple for any middle-class household.
Assess Insurance Needs
- Determine the amount of coverage needed based on annual income and liabilities. Coverage should generally be 10 to 15 times the gross yearly income.
- The sum assured must be determined, taking into account outstanding debts, expected future needs, and the rate of inflation.
Research and Compare Policies
Identify the types of term policies that exist, including:
- Pure Term Plans: These plans offer large coverage without maturity benefits. They are highly cost-effective.
- Term Plans with Return of Premium (TROP): These plans return the premium if the policyholder survives the term, though the premiums are relatively higher.
Compare Premiums Online
Premium rates can be compared using online tools. These tools are useful in identifying the best value-for-money policies.
Check Claim Settlement Ratio (CSR)
The CSR is an indicator of an insurer's credibility. A high CSR means a better settlement record.
Add Riders for Enhanced Benefits
Riders enhance the scope of coverage. Some popular riders include:
- Accidental Death Benefit Rider: Pays an additional amount in case of accidental death.
- Critical Illness Rider: Offers coverage for a financial need against diagnoses such as cancer or heart disease.
- Waiver of Premium Rider: This ensures that the policy will not lapse when the premium payer cannot pay due to disability or illness.
Conclusion
A 1 crore term insurance policy is a practical and affordable way to secure a middle-class family’s financial future. Before investing, it is wise to determine financial needs, compare policies, and choose a reliable insurer.