Simplifying Life Insurance in India
Term Insurance Plan for 2 Crore Online in India
Deciding on a 2 crore term insurance plan is a significant financial decision that requires careful evaluation. While it can be a mindful choice for some, given today’s lifestyle and inflation, it might not suffice for others.
This article explores how a 2 crore term insurance plan can meet the coverage requirements of an average Indian investor. It delves into the critical aspects of choosing such a policy, considering its benefits against your financial goals and insurance needs.
If you are contemplating securing your family’s future with a sizable term insurance plan, understand if a 2 crore policy is right for you.
Table of Contents
2 Crore Term Insurance Plan Overview
Here’s a table summarising the key aspects of a ₹2 crore term insurance policy:
What is a 2 Crore Term Insurance?
A 2 Crore Term Insurance promises financial coverage of 2 crores to the policyholder’s beneficiary in the event of their death during the policy term. This plan offers substantial financial protection, ensuring your family’s financial needs are met even in your absence.
The payout can be used for various purposes, such as paying off debts, covering daily expenses, and funding children’s education. Additionally, many plans offer flexible terms and additional benefits like critical illness cover, accidental death benefit, and waiver of premium, making it a comprehensive financial safety net for your loved ones.
Since it’s a term insurance plan, it provides only death benefit and no maturity value if the life assured survives the policy term.
How Does a 2 Crore Term Insurance Plan Work?
Term Insurance Plan is the essential component of any healthy financial portfolio. More than an investment option, it is a financial tool that secures your family's financial future and provides you with much-needed mental peace.
A rightly planned substantial insurance cover ensures that financial obligations like children's schooling, marriage, and liabilities like home loans are taken care of, and the family does not deal with the economic disruption caused by the loss of a family member.
Here is how a 2 Crore term insurance plan works:
- Sum Assured: It covers the beneficiary with 2 Crore rupees in case the policyholder dies unfortunate during the policy term.
- Policy Term: The policy has a specified term chosen when buying the policy during active coverage.
- Premium Payments: The policyholder can choose the premium amount, frequency, and tenure according to their preferences.
- Death Benefit: Since it’s a term plan, the death benefit is the sum assured, i.e., 2 crores. This death benefit is paid to the beneficiary in case of the policyholder’s unfortunate demise during the policy term.
- Maturity Benefit: If the policyholder survives the policy term, there is no maturity benefit since this is a term plan.
- Rider Benefits: By paying an extra premium, you can select different riders to receive coverage for particular risks and occurrences. However, the rider's validity is as long as the policy is valid.
Illustration
Let's take an example to understand how it works.Rohan, a 30-year-old professional, opts for a 2 crore term insurance plan with a policy term of 30 years. He chooses to pay an annual premium of ₹25,000 for the coverage. Based on his age, health status, and the policy term.
Scenario 1: Death During the Policy Term
If Rohan passed away at 45 during the policy term, his nominee would file a claim with the insurance company. After successfully processing the claim, Rohan’s nominee would receive the sum assured of ₹2 crore, helping them cover living expenses, pay off debts, or invest for future needs.
Scenario 2: Outliving the Policy Term
If Rohan outlives the 30-year term of the policy, the term plan typically does not provide any maturity benefits, meaning she would not receive any payout.
Disclaimer: The above illustration is a hypothetical example created for educational purposes only and does not represent a real-life scenario.
Is a 2 Crore Term Insurance Plan Enough for You?
Although a figure of 2 Crore seems huge, getting coverage 10-15 times your annual salary is often suggested. Given our upgraded lifestyles and ever-increasing inflation, coverage of 2 crore might not be sufficient for many people.
A correct evaluation of the required sum assured involves many factors, such as family income, expenses, future goals, inflation, loans, and liabilities. You must also factor in your family's regularly increasing financial requirements.
For a quick estimate, you can use Digit’s term insurance calculator by entering your age and annual income to get an estimate. This will give you a more accurate idea of the potential coverage needed.
A general recommendation is to secure insurance that covers 15 times your yearly salary. For instance, if you earn Rs 30 Lakhs annually, you should aim for insurance coverage of Rs 4.5 Crores (15 times 30 Lakhs). If you anticipate needing this coverage over the next 25 years (until you are 60), it's important to account for inflation and rising living costs.
Considering all the above factors, a more accurate assessment can be done using the Human Life Value calculator.
Illustration
Consider the scenarios below to understand if a 2 Crore term plan is enough.
Case 1: Mr. Rajveer
Rajveer, a 26-year-old professional, had retired parents as dependents and an annual income of ₹15 lakhs. He planned to marry in another 2-3 years and buy a house afterwards. Foreseeing future responsibilities, he bought a 2 crore term plan with a tenure of 20 years as a financial cushion for his dependents.
Unfortunately, at the age of 42, Rajveer suffered a cardiac arrest. At that time, he had a dependent wife, two kids, an outstanding home loan of ₹80,00,000, and dependent parents. Considering these liabilities and future significant expenses like the kids’ higher education, the sum of ₹2 crore was insufficient. Rajveer should have reevaluated his coverage once his responsibilities increased.
Case 2: Mr. Sudheer
Sudheer, a professional who is 30 years old, had parents who were retired and dependent on him. He was married and owned a family house. At that time, his annual income was ₹15 lakhs. He decided to purchase a 20-year term plan worth 2 crores.
Unfortunately, at the age of 40, Sudheer passed away due to an accident. He had dependent parents and an 8-year-old son. However, his wife was earning, and he had no significant liabilities, like a home loan. His son’s education was one significant expense that needed to be taken care of.
Sudheer also had considerable savings since he was an active investor in different investment instruments. Given his fewer liabilities and more assets, a term plan of ₹2 crore might be sufficient.
Note: The one golden rule to having sufficient coverage is to “Review Your Term Insurance Every 5 Years” to cover all your increased liabilities and expenses. A periodic review of your term plan ensures it aligns with your evolving financial situation. Consider revisiting the policy if significant life changes occur, such as marriage, childbirth, or career advancements.
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Benefits of 2 Crore Term Insurance Plan
A 2 crore term insurance plan provides substantial financial coverage to the policyholder's beneficiaries during their untimely demise. Here are the benefits:
1. Financial Security for Family
Ensures your family's financial stability in your absence, covering daily expenses, debts, and future goals like education.
2. Affordable Premiums
Despite the high sum assured, premiums are relatively low, especially if purchased at a younger age, making it a cost-effective choice.
3. Tax Benefits
Premiums paid and payouts received are eligible for tax deductions under Section 80C and Section 10(10D) of the Income Tax Act, enhancing savings.
4. Supports Key Life Stages
Adequate coverage to support your family through key life stages, including children's education, marriage, and spouse's retirement.
5. Debt Repayment
In the event of untimely death, the sum assured can help in repaying outstanding debts, ensuring your family's financial independence.
6. Riders
Offers the flexibility to enhance coverage through riders for critical illness, accidental death, and disability at a nominal extra cost.
7. Peace of Mind
Provides peace of mind knowing your loved ones are financially protected against life's uncertainties, allowing you to live stress-free.
8. Flexibility in Payout Options
Allows nominees to choose how they receive the death benefit - lump sum, monthly income, or a combination, suiting their financial situation.
Who Should Buy a 2 Crore Term Insurance?
1. Young Earners
Youngsters who have just started earning and are responsible for dependents should consider a 2 Crore term plan to provide a substantial financial cushion for their loved ones in the event of their demise.2. Small Business Owners and Entrepreneurs
Entrepreneurs and business owners work on credit most of the time. To cover the responsibility of some credit of an equivalent amount, they can safeguard their business and family with a 2 Crore term plan, ensuring business continuity and family well-being.3. Senior Investors
Senior people, especially the ones nearing retirement whose major life goals like house purchase and kids’ education are over, can look at buying a coverage of 2 Crore. This will provide financial protection to their dependent spouse and others in case of their unfortunate demise and take care of any pending milestones like their children’s marriage.4. Those Looking for Supplementary Coverage
One might have a certain amount of cover from their employer or an already purchased term plan during their younger days. During periodic reassessment, they realised they needed a higher sum assured for sufficient coverage. In such a case, they can buy a 2 Crore term plan as an additional cover.5. People with Loan Liabilities
Individuals with substantial loans, such as home loans, can buy a 2 Crore term plan to cover these liabilities and prevent them from becoming a burden on surviving family members in case of the unfortunate demise of the borrower.6. Those Looking for Future Financial Planning
Those who envision a financially secure future for their loved ones should opt for a 2 Crore term plan. One might have calculated that their kids would require a certain sum for their higher education. They can buy a 2 Crore plan covering their kids’ education if other liabilities are covered already.Eligibility Criteria for 2 Crore Term Insurance
The exact eligibility criteria may vary slightly between different insurance providers. The following table provides a general overview.
Documents Required for 2 Crore Term Insurance Plan
To purchase a 2 Crore term insurance plan, applicants are required to submit the documents listed below:
Note: Depending on the insurance provider, each section requires one or two documents as proof.
How to Calculate the Premium for a 2 Crore Plan
To calculate the premium for a ₹2 crore term insurance plan, you need to consider several factors such as the policyholder’s age, health, lifestyle, occupation, and the policy term. Additionally, you might want to explore extra coverage options like critical illness riders or accidental death benefits.
Let’s assume a 1 crore term insurance plan details for Anita as an example:
- Age: 30 years
- Health Status: Non-smoker
- Policy Term: 20 years
- Sum Assured: 2 crore
- Riders: No additional riders
Insurers calculate the base rate based on age, health status, and sum assured. In Anita’s case, let's assume that the base rate is ₹1.5 per thousand of the sum assured. Here is how the premium is calculated:
- Base Premium = (Sum Assured/1,000) × Base Rate
- Base Premium = (2,00,00,000/1,000) × 1.5 = ₹30,000 per year
Anita’s base premium comes out to be ₹30,000 per year. This amount reflects her age and healthy lifestyle, providing comprehensive coverage for her substantial sum assured.
While Anita has opted not to include additional riders in her policy now, she knows she can always revisit her options. Riders such as those with Critical Illness or Accidental Death Benefits could be considered if her needs change or if she wish to enhance her policy's coverage further.
Disclaimer: The above calculations are only for illustration purposes. For an accurate calculation, it's best to use an online premium calculator provided by insurance companies or consult with a financial advisor as they consider all the specific details and current rates.
How to Choose the Right Life Coverage for Yourself?
Choosing the right life coverage is essential for securing your financial future and providing peace of mind for you and your loved ones. What is that exact figure that you should choose to have a sufficient life coverage?
Let's find the answers:
1. Assess Your Life Goals
Understanding your life goals is the first step in choosing the right life coverage. Whether it's providing for your family, covering your children's education, or leaving a legacy, your goals will be the primary factor in deciding the type and amount of coverage you need.2. Consider Your Financial Liabilities
Take into account your financial obligations, such as mortgages, loans, and any debts. The life coverage that you decide should be sufficient to cover these liabilities, ensuring your family doesn't inherit your financial burdens if anything happen to you.3. Evaluate Your Health and Lifestyle
Your health and lifestyle can significantly impact your life insurance premiums and coverage options. Smokers, or those with pre-existing health conditions, may face higher premiums. Being honest about your health will help you find the most suitable coverage.4. Consider Your Estimated Working Years
Reflect on how many years you plan to work before retirement. Most of your financial goals ideally must be completed during these years. This will help determine the duration of coverage you need. Also, you would be better able to handle the premium payments during these years. Ensuring your policy covers you until you retire can provide financial stability for your dependents.5. Use a HLV Calculator
Utilising a human life value calculator can help quantify your financial contribution to your family by considering your income, expenses, debts, and investments. It considers all the factors discussed above and better estimates the required coverage.Factors to Consider Before Buying a 2 Crore Term Insurance Plan
1. Financial Assessment
The most crucial factor is determining your coverage correctly. Evaluate your personal requirements, the current liabilities, future expenses, and the required amount for safeguarding your family. Assess if your chosen term plan aligns with your financial goals.2. Claim Settlement Ratio
The primary function of insurance is to provide financial support to the dependents in case of unfortunate demise of the life assured. Thus, claim settlement is highly important.
A claim settlement ratio reflects the percentage of claims settled by an insurer in a particular year. Thus, a higher claim settlement ratio means a higher likelihood of your claim being settled by the insurer.
3. Premium Affordability
Check if the premium fits your budget. You can research across different insurers for the same. Accordingly, decide on regular pay, single pay, or the various kinds of payment frequencies like annual, biannual, quarterly, or monthly.4. Term Duration
Choose a policy term that aligns with your financial responsibilities. If you take this plan to cover some loan, you can choose a term equal to the loan duration. Similarly, if it's for coverage during your early earning years, you can choose a shorter term because you'll need to reevaluate it once your responsibilities go up.5. Rider Options
Consider additional riders such as critical illness coverage, accidental death benefits, and waiver of premium in case of disability. These can enhance your coverage and provide extra protection tailored to your needs.6. Policy Exclusions
Familiarize yourself with all policy exclusions so that it doesn't come as a surprise when the need arises. Being aware of the exclusions where your policy will not pay out ensures realistic expectations and informed decision-making.7. Inflation
Consider the inflation factor when determining the coverage amount. What seems adequate today might not be sufficient due to rising costs.Common Reasons for 2 Crore Term Insurance Plan Rejection
1. Suicide
Most insurance policies have a suicide clause, typically stating that if the insured commits suicide within a specified period (usually one or two years) from the policy start date, the claim will not be honoured. Also, If the insurance company suspects the application is an attempt to benefit from such circumstances, they may reject the policy.2. Participation in Hazardous Activities
Individuals engaging in hazardous activities like skydiving, scuba diving, motor racing, and other high-risk sports are considered high-risk. Insurers may reject applications or charge higher premiums to cover the increased risk of death.3. Self-Inflicted Injuries
Policies often exclude coverage for death due to self-inflicted injuries. If there's evidence that the applicant has a history of self-harm or attempted suicide, the insurer may deny coverage.4. Criminal Activities
Death resulting from criminal activities such as involvement in illegal activities, participation in violent acts, or membership in criminal organisations is usually excluded from coverage. Insurers may reject applicants with a criminal record to mitigate risk.5. Substance Abuse
Substance abuse, like abuse of alcohol, drugs, or other substances, significantly increases health risks and the likelihood of premature death. Insurers may reject applications from individuals with a history of substance abuse.6. Pre-existing Medical Conditions
Applicants with severe or multiple pre-existing medical conditions like chronic diseases like diabetes, heart disease, cancer, etc, are considered high-risk. Insurers may reject their applications or offer coverage with exclusions and higher premiums.7. War and Terrorism
If an applicant is in a high-risk profession or region prone to acts of war or terrorism activities, the insurer may deny coverage to avoid potential large-scale claims.8. Non-Commercial Aviation
The risk of aviation accidents is substantial. Insurers may refuse to accept applications or increase premiums for individuals involved in aviation activities outside of commercial airline travel, including pilots, crew members, or frequent flyers in non-commercial aircraft.Tax Benefits for 2 Crore Term Insurance Policies
Section 80C: Premium Payments
Under Section 80C, you can claim a tax deduction for your term insurance policy premium, up to 1.5 lakh INR annually. This deduction is available to individuals and Hindu Undivided Families (HUFs).
Who Can Qualify?
- If your policy was issued on or after April 1, 2012, your premium should not be more than 10% of the sum assured.
- The premium should not exceed 20% of the sum assured for policies issued before that date.
Section 10(10D): Maturity Benefits
Under Section 10(10D), the money you receive from your term insurance policy, including the death benefit, is completely tax-free.
Conditions:
- For policies issued on or after April 1, 2012, the premium must not exceed 10% of the sum assured.
- The premium must not exceed 20% of the sum assured for older policies.
TDS: If your policy doesn’t meet these conditions, a 5% tax will be deducted at the source if the payout exceeds 1 lakh INR in a financial year.
Section 80D: Health Riders
Under Section 80D if your term insurance policy includes extra health-related coverage like critical illness or accidental death, you can claim an additional tax deduction for the premium paid for these riders.
How Much Can You Deduct?
- If you are under 60, you can claim up to 25,000 INR.
- If you are a senior citizen, you can claim up to 50,000 INR.
- This deduction is separate from the 1.5 lakh INR limit under Section 80C.
A 2 crore term insurance plan offers substantial financial protection for your family at affordable premiums. It ensures a significant payout during the policyholder’s death, helping cover major expenses like loans and education. However, it doesn’t provide maturity benefits if the policyholder survives the term.
Despite this, the high coverage and tax benefits make it a mindful choice for those with significant financial responsibilities. Considering inflation and future financial needs is essential when selecting the coverage amount.
FAQs about 2 Crore Term Insurance
How much does a 2 crore term insurance cost?
How often do I need to pay premiums for my 2 crore term insurance policy?
What is the minimum salary for 2 crore term insurance?
What is the best age to buy a 2 crore term plan?
What is the eligibility to buy a 2 crore term insurance?
How can I buy 2 crore term insurance plans?
Is there a free-look period with the term insurance plan for 2 crore?
Which riders are available with 2 crore term insurance?
What is the minimum entry age for 2 crore life insurance policy?
Can I buy the best term insurance plan for 2 crore online?
Is the 2 crore term insurance plan tax-free?
Is a medical checkup necessary to buy 2 crore term insurance?
Is 2 crores the right coverage amount for your term plan?
How does a 2 crore term insurance plan's coverage differ from a 1 crore plan?
How does inflation protection work within a 2 crore term insurance plan?
Inflation protection in a 2 crore term insurance plan ensures coverage increases over time to keep pace with inflation. This feature is typically offered as an add-on rider, where the sum assured increases by a fixed percentage each year.
For example, if you opt for a 5% annual increase, the coverage amount will grow from 2 crores to 2.1 crores in the first year, and so on. This helps maintain the purchasing power of the death benefit.
What is the impact of occupation type on the premium and coverage for a 2 crore term insurance plan?
How does a 2 crore term insurance plan handle pre-existing diseases and medical conditions during underwriting?
What factors influence the premium for a 2 crore term insurance plan beyond age, gender, and smoking habits?
How do different payment modes impact the overall cost of a 2 crore term insurance plan?
How can I increase the sum assured in a 2 crore term insurance plan without undergoing a medical examination?
What documents are required for a smooth claim process in a 2 crore term insurance plan?
How does a nominee claim the death benefit in a 2 crore term insurance plan?
How does a 2 crore term insurance plan handle accidental death and disability benefits?
What are the advantages and disadvantages of opting for a 2 crore coverage?
Opting for a 2 crore coverage in a term insurance plan has several advantages, including substantial financial security for your family, the ability to cover significant debts and support for long-term financial goals.
However, higher coverage also means higher premiums, which may strain your budget. Qualifying for such coverage may require a thorough medical examination and detailed financial assessment.
What are the considerations for individuals with high-risk occupations when choosing a 2 crore term insurance plan?
Other Important Articles Related to Term Insurance
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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