We shall start with term insurance. Term insurance is the most basic type of life insurance. You allocate a small amount (called a premium) annually to the insurance company.
Discussing the future with your family probably involves talking about safety measures, right? After all, our parents should be at ease, kids should attend the best schools, and partners should enjoy a stress-free life. Here in India, a particular term has been a benchmark for such reassurance: 1 crore term insurance.
Then you must be wondering what it is about this number that makes it the most preferred one. Why not 50 lakhs or 2 crores? Here, in very simple terms, is a deconstruction.
What is Term Insurance?
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We shall start with term insurance. Term insurance is the most basic type of life insurance. You allocate a small amount (called a premium) annually to the insurance company. The company, on the other hand, in the event of your demise, would give the family a large amount of money.
Imagine there has been an accident and you cannot work anymore. Imagine not being able to work for a whole year. How will you live? Where will your money come from? The insurance policy in your name will take care of your family. They will receive so much money that they won't have to face any financial problems, even if they die. The point is you should choose term insurance policies that provide big protection amounts to your family.
Why the Magic Number of "1 Crore"?
Previously, 10 to 20 lakhs could be considered quite a sum. However, that is the past. India is growing fast, and prices are going up every year. The gradual increase of prices is called inflation.
An insurance cover of 1 crore was considered big money. Even then, a single-digit inflation rate roughly means that 1 crore today is just about equivalent to lakhs of rupees in today's money. This estimate is based on the average price rise over the last few years. Therefore, if one wishes to maintain the same standard of life, getting a minimum of 1 crore in term insurance coverage is a rational choice.
1. Beating the Rising Costs (Inflation)
Basic commodities like milk, petrol, school fees, and house rent increase in price every year. This is inflation for you. 1 crore today may look like a lot, but after 15 years, this will be equivalent to a much smaller amount today. By getting a 1 crore insurance cover, you are ensuring that even if life gets a little more expensive, your family will have enough to continue their lives without any financial difficulties.
2. Getting Rid of Your Debts
Sometimes, our purchase of a dream home or car depends on loans. If the earning member of the family dies, the family can get stuck with the loan amount. A term insurance return of 1 crore settles the home ownership with the family, and also the outstanding bank loans are taken care of immediately.
3. Making Plans For Big Dreams
We all set big targets for ourselves. Your daughter may plan higher education abroad and, your son, a wedding. Such occasions require a hefty sum of money. With 1 crore as a base, your children's aspirations will not have to end due to lack of money.
It Is Surprisingly Affordable
It is a huge misconception that a 1 crore plan should cost a lot. In fact, it is contrary to the fact. Term insurance being a "pure" plan (no money is given to you if you outlive the term), the prices are quite low. If you are in good health and between the ages of early 20s and early 30s, then the cost of a 1 crore cover can be comparable to what you spend on a monthly pizza delivery or movie ticket.
Main Point: You are purchasing a huge level of safeguard by just spending the price equivalent to a couple of monthly treats. This "high cover, low price" combo is the reason for its popularity all over India.
Who Should Purchase It?
You are the one who does the billing in the house, then you must think about that. It covers possibilities such as the following:
- Young Professionals: The earlier you start, the lower the price.
- Married Couples: To be sure your partner is never in a position of having to struggle alone.
- Parents: To give security to your children even after you are no longer there.
- People with Home Loans: So that the house, which is the biggest asset, can be safeguarded.
How to Choose the Right Plan?
Don't just pick the first 1 crore term insurance plan whenever you want. Here are 3 easy ways to evaluate:
- Claim Settlement Ratio (CSR): This percentage reflects the number of claims a company has paid. Find a corporation with a high CSR (typically 97% or 98% and above). It indicates that the company is reliable.
- Add-on Covers (Riders): Some plans offer you extra support if you suffer from a critical illness or have an accident. Small extra payments that greatly increase the plan's value.
- Simple Paperwork: Go for a company that makes the whole thing easy and paperless. Nowadays in India, you can purchase a plan from your phone within a few minutes.
Is 1 Crore Enough for You?
1 crore may be a very good amount for a term insurance sum coverage for most people, but doing a quick "back-of-the-envelope" calculation will help know for sure.
- Simply take your yearly salary and multiply it by 10 or 15.
- Add any major loans that you carry on your head.
- That number being somewhere in the vicinity of 1 crore means you are doing well!
For a middle-class family living in a metropolitan area of Delhi, Mumbai, or Bangalore, 1 crore in term insurance is commonly the "just right" amount, which is enough to cover everything and at the same time is not too expensive.
Conclusion
Life is unpredictable, but we can always prepare for it. Buying a term insurance plan is like a loving gesture. It shows your family, "I will be there for you, whatever happens." One crore term insurance is the most popular because it is the most dependable, it is of a significant enough amount to be useful, and it is affordable enough for almost everyone to purchase.
Besides being a mere policy, it is a guarantee of a stress-free sleep. In case you are not yet protecting your family, today is a wonderful time to get started. It will take you even less time than a tea break, but the advantages will be with you all your life.
