Is it a Good Idea to Buy a 50 Lakhs Term Insurance Plan?

In an unpredictable world, it is of utmost importance to secure one’s financial future. A term plan provides a financial coverage that is a must needed safety net for one’s dependents.

As much as it is necessary to have a financial coverage, it is also equally important to have a sufficient one. On these lines, lets discuss about a 50-lakh term plan. The intricacies of 50 lakh term insurance, its benefits, cases where it can be useful and the most important one: Is a 50-lakh term insurance enough for you?

Term plans are the most basic form of life insurance that pay a death benefit in case of life assured’s demise, in return for a premium paid. They do not have any savings component and hence do not pay any survival benefit.

A 50-lakh term insurance pays a death benefit of 50 lakh in case of unfortunate demise of the life assured.

This death benefit amount must act as all the lost income that the life assured would have earned had they been alive. It must take care of the family’s liabilities, current financial requirements, and future goals. Thus, it is highly imperative to evaluate the required sum assured while buying a term plan.

Although a monetary figure of 50 lakh might seem a big amount, they are not even close when we talk about life cover.

Let’s consider the case of Mr. Aditya:

Suppose Mr. Aditya bought a term plan for 50 lakhs at the age of 25. At that age his only liability was his education loan, given that both his parents were still working, and supporting his younger sister who was studying.

Today, Mr. Aditya is 45 years old. He has a son who is in class 10th, a wife, retired parents living with him.

Talking about liabilities, other than the dependents, he has an outstanding home loan of 70 lakh, a car loan of 11 lakh, upcoming higher education of his child which will easily cost around 1 crore, recurring medical expenses of his old parents and other lifestyle requirements.

Do you think his old coverage of 50 lakh is sufficient even today?

Most people are unable to correctly evaluate their coverage requirements. A simple rule is to have a cover 10 times of your annual income. However, given the rising inflation and lifestyle requirements, it does not always hold true.

Another, more accurate method is the human life value method that takes into account the liabilities, the savings, assets and many other variables to arrive at a sum assured required to replace the lost income of an earning person.

This optimum coverage requirement can thus vary across people depending on the variables.

1. Those Looking for Financial Protection on Their Debts

Loan is the essential financial companion in times of need. Be it a lifestyle elevation like buying a new car, moving into a new house, renovation or some life goal like marriage or education, a term insurance policy serves as a reliable shield against unforeseen circumstances.

Buying a term plan of the loan equivalent amount ensures that the outstanding loans are settled without burdening family members.

2. Pre and Post Retirees

As people approach retirement, the major portion of their liabilities is over: home loan, child education etc. Now, in most cases, they just need to take care of the basic lifestyle and necessities for themselves and their dependents.

Thus, a 50-lakh term insurance plan can serve as a sufficient coverage alleviating the stress of financial commitments for the dependents, in case of unfortunate demise of the policyholder.  

3. Those Pursuing Higher Education

Pursuing higher education can be a costly affair given that most of the higher education courses are highly expensive. It becomes even more difficult in case of people with dependents, given the liability that it brings along.

Suppose Mr. A, at an age of 35, decides to go for an executive MBA. The fee for the course is 40 lakhs, for which Mr. A borrows an education loan. For the duration in which he finishes his course and pays off the loan, this added liability can be covered with a 50 lakh term insurance.

This protection ensures that the dependents don’t have to deal with financial turmoil of the education loan liability in case of his unfortunate demise.

4. Those Looking for Charitable Contributions

5. Those Looking to Supplement their Existing Coverage

You might have a term plan cover from your employer or one from the younger days that now seems insufficient due to added liabilities. In such a case, you can take a 50-lakh term insurance.

This supplementary coverage offers an extra layer of protection for the family's long-term financial well-being. It acts as a prudent measure, addressing unforeseen circumstances that may surpass the coverage of the existing policy.

Given the fact that term insurance premiums are quite affordable, an average earning individual should at least plan to buy a 1 crore term insurance, even for the start. However, the correct coverage depends on the evaluation.

So, the question is not if the 50-lakh term insurance plan is sufficient,

But the question is - Is a 50 Lakh term insurance plan sufficient for You?