We all desire to secure our loved ones. To do so, one of the ways is through the purchase of term insurance. It is a basic life insurance policy. If you die during the policy period, your family will receive a specific amount of money. This amount of money can make them live without worry. It can cover their day-to-day expenditures, rent of the house, school fees, loans, or medical bills.
Term insurance is a safety net. You pay a nominal sum annually, which is referred to as a premium. Your family receives a big sum of money, which is referred to as the sum assured, if anything untoward happens to you within the policy duration. This amount enables them to live their life without financial issues.
Now, most people have a question in mind:
Shall I purchase 1 crore or 2 crore term insurance?
Let us see this in simple terms.
What Does “1 Crore Term Insurance” Mean?
A 1 crore term insurance provides a death benefit ₹1 crore to your family if anything happens to you. This amount is tax-free and can be used to do whatever your family requires.
At first glance, ₹1 crore is such a big figure. However, if we consider daily expenses, inflation, loans, and education for children, at times it might not be sufficient. Hence, most folks also look into 2 crore term insurance for greater security. Now let’s discuss how to determine what’s best for you.
Start With These 5 Easy Questions
Before deciding between 1 crore and 2 crore, ask yourself:
- How much does my family require each month?
Consider food, rent, charges, transport, and so on.
- How long will they require assistance?
Is your child small in age? Is your partner employed? It’s a consideration.
- Do I owe any loans or EMIs?
Such as a home loan, a car loan, or any personal loan.
- Do I have any savings or other insurance?
This can lower the overall cover you might require.
- How much premium can I pay?
Your budget matters. Choose a plan that is comfortable to pay for.
After you respond to these questions, the decision becomes clearer.
1 Crore Term Insurance: When It Makes Sense
Opt for ₹1 crore cover if:
- You are beginning your career.
- Your monthly outgoings are low.
- You have no large loans or EMIs.
- You already possess some savings.
- Your family is comfortable with simple living.
Assume that you are 30 years old with a salary of ₹40,000 per month. Your family requires ₹25,000 per month, and you don’t have any loans. In that scenario, ₹1 crore will provide them with sufficient backing for the next 20 to 25 years. They can use it to pay rent, school fees, and medical expenses.
So, if your financial burden is minimal at present, a 1 crore cover is an excellent beginning.
2 Crore Term Insurance: When You Need It
Opt for ₹2 crore cover if:
- You are the sole earner in your household.
- You have kids who will attend school or college.
- You have a home loan or other large loans.
- Your lifestyle is premium.
- You wish to safeguard your family for 25–30 years or more.
For instance, if you take ₹80,000 to ₹1,00,000 a month as your salary and you have a ₹40 lakh house loan, ₹1 crore can prove to be less. Studies and medical expenses are increasing by the year. Your family might require funds for a longer period. In that scenario, ₹2 crore can be a better bet.
Also, keep in mind that 2 crore term insurance does not equal two times the premium of 1 crore. Most insurance firms have higher coverage available at very attractive prices. If you are young and healthy, you can have a ₹2 crore cover at a very reasonable price.
Don’t Know What to Opt For? Use This Simple Formula
If you’re still confused, here’s a simple formula to determine the right cover:
Ideal Cover = (Your annual income) × (Number of years your family will require support) + Outstanding loans – Existing savings
Suppose your annual income is ₹10 lakhs, and your family requires support for 20 years, that’s ₹2 crores. Suppose you also have an outstanding loan of ₹30 lakh and savings of ₹10 lakh. The calculations become:
(₹10 lakhs × 20 years) + ₹30 lakhs – ₹10 lakhs = ₹2.2 crores
So here, a ₹2 crore term plan is an intelligent decision.
How Much Will It Cost?
Now let’s discuss the premium – the annual amount you pay for the policy.
If you are 30 years old, a 1 crore term plan can cost between ₹7,000 to ₹10,000 annually. That’s roughly ₹600 to ₹800 monthly.
For a term plan of 2 crore, the annual premium could be ₹12,000 to ₹18,000. That’s about ₹1,000 to ₹1,500 per month.
Consider it this way: it’s the price of one evening dinner or a few coffees a month. But in return, your family receives long-term financial security.
Additional Tips to Guide You
Here are some additional things to consider:
- Buy early: The sooner you purchase, the less you pay. It’s intelligent to start early.
- Save for the future: Prices go up. Therefore, always keep inflation in mind when you plan.
- Include riders: You can include accidental death or critical illness cover. These provide additional safety at a small additional price.
- Compare policy: Always compare and check policies online before purchasing.
- Check your policy regularly: If your income or family status changes, revise your cover.
Conclusion
There is no one-size-fits-all answer. But here is an easy way to remember:
- If your liabilities are minimal, opt for 1 crore term insurance.
- If your dependents are entirely dependent on you, and you’ve got large future objectives or loans, opt for 2 crore term insurance.
The key is to make sure your loved ones are safe, even when you are not. That’s the true purpose of term insurance.
So take a few minutes, calculate it quickly, and select a plan that allows you to sleep better at night. The right choice today can cover your loved ones for many years ahead.
Also Read: How Claim Settlement Ratio Impacts Your Term Insurance Coverage
