Is a ₹50 Lakh Term Insurance Enough? Choosing the Best Term Life Insurance for Your Needs

Term insurance would usually be the easiest way of ensuring your dear one’s financial security. But what is enough? Anyone is likely to purchase a ₹50 lakh term policy, thinking that it’s the best thing to do. But whether it is sufficient entirely depends on some factors like your expenditure, plans, and existing commitments. Let us check whether a ₹50 lakh term insurance policy is your requirement and how to choose the right term life insurance policy for you.

What Is Term Insurance?

Term insurance is a simple and cost-effective form of life insurance. It protects money during a particular period, say 10, 20, or 30 years. When the policyholder dies within the term of the policy, the nominee receives the sum assured, i.e., the death amount. Term policies never provide maturity proceeds like any other insurance policy; thus, they are cheap.

Why Use Term Insurance?

Term insurance keeps your family financially secure even without you. The settlement can pay for:

• Basic living expenses
• Child education expenses
• Repayment of loans
• Medical emergencies

Term life insurance is important because it gives one peace of mind, knowing that their family will not suffer financially when they are not around.

Read More: Term Life Insurance: Step-by-Step Guide for Beginners

Is a ₹50 Lakh Term Insurance Enough?

The sufficiency of a ₹50 lakh term insurance is largely dependent upon elements of your current day-to-day expenses, loans, and long-term financial plans. Experiment with these tips to determine whether ₹50 lakh is an appropriate amount insured on you:

Calculate Your Financial Liabilities: Start with paying back all your loans, be it a home loan, a car loan, or a personal loan. For instance, if you have a pending home loan of ₹20 lakh, a ₹50 lakh term insurance policy will leave your family with ₹30 lakh after clearing the loan. But would that be sufficient for other expenses?

Estimate Family Expenses: Keep in mind your family’s yearly living expenses, i.e., rent, food, electricity, and transportation. Add them together and multiply them by the number of years you would like your family to be economically stable. Suppose your family’s yearly expense is ₹5 lakh, and you would like your family to be economically stable for 10 years, then you would need at least ₹50 lakh.

Consider Inflation: Inflation consumes money’s buying power over time. Sufficient today may be in short supply ten years from now. A ₹50 lakh term insurance policy can be sufficient today, but not tomorrow. Opt for a policy with a rising cover option that increases the sum assured annually to compensate for inflation.

Include Future Ambitions: If you’re planning for your children’s education or marriage, factor those costs into your calculation. For instance, higher education costs can easily exceed ₹20-30 lakh in the coming years. Ensure your term insurance can cover these milestones.

Pros and Cons of ₹50 Lakh Term Insurance

Pros:

• Affordable Premiums: A ₹50 lakh term insurance is cost-effective, especially for young policyholders.
• Basic Financial Cover: It provides you with a good basic cover for repayment of loans and medical expenses of immediate family members.
• Add-On Flexibility: Riders like critical illness or accidental death benefits can be availed as add-ons.

Cons:

• Can Be Too Little: For big financial liabilities of families, ₹50 lakh can prove to be too little.
• No Creation of Wealth: Term insurance does not create wealth like endowment or ULIP policies.

How to Choose the Best Term Life Insurance

Choosing the best term life insurance takes more than looking for premium rates. Consider the following:

1. Claim Settlement Ratio (CSR):

The claim settlement ratio refers to the percentage of claims paid by an insurer. Opt for an insurer with a high CSR level (above 95%) so that your family will not be hurt in claiming under your policy.

2. Premium Affordability:

Although term plans are extremely low-cost, premiums vary with age, health, and lifestyle. Get quotes online using calculators of various insurance companies.

3. Rider Options:

Tailor your policy with riders such as:

• Critical Illness Rider: Covers hospital expenses in case of critical illness.
• Accidental Death Benefit: Pays an additional amount in case of accidental death.
• Waiver of Premium: Waives future premiums in case of disability or critical illness.

4. Policy Term and Coverage:

Choose a policy period that matches your milestones in terms of finances. For example, if your youngest child is 5 years old, you might require coverage for a minimum of 20 years until they become financially independent.

5. Increase Coverage:

Some policies also have the option of increasing the sum assured later on. This is very useful to account for inflation as well as changing financial needs.

Why ₹50 Lakh May Be Right For You

For bachelors or those with minimal financial liabilities, a 50 lakh term insurance policy should suffice. It is also a good beginning for young professional individuals who would like to increase their coverage with the growing years.

When to choose Higher Coverage

If you’re the sole breadwinner with significant liabilities and future goals, consider policies offering higher coverage, such as ₹1 crore or more. While the premiums will be slightly higher, the added peace of mind is worth it.

Tips to Get the Best Term Life Insurance Policy

• Buy Early: Premiums are lower when you’re young and healthy.
• Disclose Honestly: Avoid withholding health or lifestyle information during the application process to prevent claim rejection.
• Go Digital: Online bought policies are cheaper on your pocket than offline policies.

Read the Fine Print: Read exclusions, waiting periods, and other terms carefully before buying your policy.

Read More: How Term Insurance Costs Vary by Age & Policy Type?

Conclusion:

A ₹50 lakh term insurance coverage could be just right for you, while for some others it would be too low. Consider your savings, your dependents’ needs, and your plans to arrive at a sufficient amount covered. Provided it is thoroughly researched and planned, you can choose the best suitable term life coverage that will protect your loved ones regardless of what befalls you.

It’s not all about numbers when you purchase term insurance; it’s all about your family getting their dreams and aspirations. If you opt for a ₹50 lakh term insurance plan or any other amount more than the above, take a well-informed decision so your family gets a safe financial future.