Simplifying Life Insurance in India
Term Insurance Plan for 50 Lakh Online in India
A 50 lakh term insurance plan is a way to ensure your family's financial security if something happens to you. It's a pure protection policy offering a substantial sum assured at affordable premiums, promising a large payout if you pass away unexpectedly. This kind of insurance helps your family cope with financial challenges without struggling.
Let’s discuss a 50 lakh term insurance plan: how it works, its benefits when it’s helpful, and, most importantly, whether it’s enough for your needs.
Table of Contents
50 Lakh Term Insurance Plan Overview
Here’s a table summarising the key aspects of a 50 lakh term insurance policy:
What is a 50 Lakh Term Insurance Plan?
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 policy pays a death benefit of 50 lakh in case of the life assured's unfortunate demise.
This death benefit amount must cover all the lost income that the life assured would have earned if they were alive. It must also cover the family’s liabilities, current financial requirements, and future goals. Thus, evaluating the required sum assured while buying a term plan is imperative.
How Does a 50 Lakh 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 term insurance plan with a sum assured of 50 lakhs works as follows:
- Coverage Amount: The plan provides a sum assured of 50 lakhs, which is the amount your beneficiaries will receive in the event of your death during the policy term.
- Policy Term: This is the duration for which the insurance is active. Depending on the plan, it can vary from 5 to 30 years or more.
- Premiums: You pay regular premiums (monthly, quarterly, semi-annually, or annually) to keep the policy active. The premium amount is based on age, health, and policy terms.
- Death Benefit: If the policyholder passes away during the policy term, the nominee receives the sum assured of 50 lakhs.
- Maturity Benefit: Term insurance plans do not offer maturity benefits. If the policyholder survives the policy term, there is no payout.
- Rider Benefits: Some plans offer additional riders, such as accidental death benefits or critical illness coverage, for an extra premium.
- Tax Benefits: Premiums paid for term insurance can qualify for tax deductions under Section 80C of the Income Tax Act, and the death benefit is tax-free under Section 10(10D).
Illustration
Mr Kamat, a 40-year-old businessman, decided to secure his family's future. He learned about term insurance and was particularly interested in a plan that would provide a sum of ₹50 lakhs if something happened to him. After discussing with an insurance advisor, he purchased a ₹50 lakh term insurance policy.
Kamat has been committed to paying a premium of ₹15,000 annually for 20 years. He set up an auto-debit system to ensure he never missed a payment. The premium was deducted from his bank account each year, and he received a confirmation from the insurance company.
Scenario 1: Unexpected Event
If Mr Kamat passes away during the policy term, the insurance company quickly processes the claim, and within a few weeks, ₹50 lakhs are transferred to Mr Kamat’s family. With the ₹50 lakhs, Mr Kamat’s family manages their finances comfortably. They pay off debts, ensure their children's education, and secure their future.
Scenario 2: On Survival
If Mr. Kamat survives the entire policy term, he would have simply stopped paying premiums after 20 years, and the insurance policy would have expired without any payouts.
Disclaimer: The above illustration is a hypothetical example created for educational purposes only and does not represent a real-life scenario.
Is a 50 Lakh Term Insurance Plan Sufficient for You?
At first glance, having a life insurance cover of ₹50 lakh might seem like a hefty sum. Here are two scenarios - one where a 50 Lakh term insurance plan is sufficient and another where it falls short:
Case 1: Mr Rohan
Rohan is a 35-year-old software engineer who lives with his wife, Priya, and their two young children. His annual income is ₹12 lakhs, and he has diligently managed his finances. They own a modest home with a mortgage, and Rohan has saved up educational and emergency funds.
Rohan decides to buy a 50 Lakh term insurance plan. He aims to protect his family financially if something happens to him. Given their current financial stability, Rohan’s term plan provides:
- Mortgage Coverage: ₹50 lakh is enough to cover the outstanding mortgage, ensuring Priya can continue living in their home without financial strain.
- Education Fund: The amount would also cover the children's education expenses until independence.
- Emergency Fund: It ensures Priya has a safety net to manage daily expenses and unexpected costs for a few years.
The 50 Lakh coverage for Rohan is sufficient, as it meets his family's immediate financial needs and long-term goals.
Case 2: Meet Aman
Aman, age 40, is a successful businessman with a significantly higher annual income of ₹25 lakhs. He has a large home with a high-value mortgage, a diverse investment portfolio, and substantial future financial commitments, including his children's higher education and business expansion plans.
Aman opts for a 50 Lakh term insurance plan. However, considering his financial situation:
- Mortgage Coverage: The ₹50 lakh coverage is inadequate to settle his large mortgage fully.
- Business Continuity: His business requires additional funds to ensure smooth operations and cover potential losses in his absence.
- Education and Future Planning: The amount must be sufficient to cover the substantial funds required for his children's higher education and other long-term goals.
Aman does not need a 50 Lakh term insurance plan. He needs a higher coverage amount to fully protect his family’s financial future and meet all his financial commitments.
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 common guideline is coverage equal to 10 times one's annual income. However, this rule might only sometimes be sufficient with inflation and evolving lifestyle needs. For a more precise calculation, consider the Human Life Value (HLV) method.
Benefits of 50 Lakhs Term Plan
A 50 lakh term insurance plan provides substantial financial coverage to the policyholder's beneficiaries during their untimely demise. Here are the benefits:
High Sum Assured
Provides a significant payout of ₹50 lakhs to beneficiaries in case of the policyholder’s death.
Financial Security
Ensures financial stability for family members or dependents by covering essential expenses.
Affordable Premiums
Term plans generally offer higher coverage at relatively lower premiums than other policies.
Tax Benefits
Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act.
Customisable Coverage
Policies can often be tailored with riders for additional protection, like accidental death benefits.
Loan Protection
Can cover outstanding loans or debts, preventing financial burden on the family.
Long-Term Coverage
It covers the entire term, which can be as long as 30-40 years, depending on the policy.
Simplicity
Straightforward and easy to understand, with no investment component, focusing solely on protection.
Who Should Buy a 50 Lakh Term Insurance Plan?
1. Those Looking for Financial Protection on Their Debts
A loan is an 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, most of their liabilities are over home loans, child education, etc. 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 provide sufficient coverage, alleviating the stress of financial commitments for dependents in the unfortunate demise of the policyholder.
3. Those Pursuing Higher Education
Pursuing higher education can be costly, given that most of the higher education courses are highly expensive. It becomes even more difficult for people with dependents, given the liability it brings along.
Suppose Mr. A, age 35, decides to pursue an executive MBA. The fee for the course is 40 lakhs, for which Mr A borrows an education loan. For the duration he finishes his course and pays off the loan, 50 lakh term insurance could cover this added liability.
This protection ensures that the dependents don’t have to deal with financial turmoil of the education loan liability in case of their unfortunate demise.
4. Those Looking for Charitable Contributions
Individuals with philanthropic inclinations can utilize a 50 lakh term insurance policy to support charitable causes. They can designate the death benefit payout to charitable organizations or causes, ensuring peace of mind that they have done their part for society and made a positive impact.5. Those Looking to Supplement their Existing Coverage
You might have a term plan covered by your employer or one from the younger days that now seems insufficient due to added liabilities. In such a case, you can get 50 lakh term insurance.
This supplementary coverage offers extra protection for the family's long-term financial well-being. It acts as a prudent measure, addressing unforeseen circumstances that may surpass the existing policy's coverage.
Also Read About:
Eligibility Criteria for ₹50 Lakh Term Insurance
The exact eligibility criteria may vary slightly between different insurance providers. The following table provides a general overview.
Documents Required for ₹50 Lakh Term Insurance Plan
To purchase a 50 Lakhs 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 50 Lakhs Plan?
To calculate the premium for a ₹50 lakh 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.
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 premium.
Let’s assume a 1 crore term insurance plan details for Anita as an example:
- Age: 30 years
- Health Status: Non-smoker
- Policy Term: 15 years
- Sum Assured: ₹50 Lakhs
- Riders: No additional riders
Insurers calculate the base rate based on age, health status, and sum assured. In Emily’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 Calculation:
- Base Premium = (Sum Assured / 1,000) × Base Rate
- Base Premium = (50,00,000 / 1,000) × 1.5 = ₹7,500 per year
Emily's base premium is ₹7,500 per year. This amount reflects her age and healthy lifestyle and provides significant coverage for her chosen sum assured.
Although Emily has decided not to add any extra riders to her policy now, she is aware that she can review and adjust her policy options in the future. Additional riders, such as Critical Illness or Accidental Death Benefits, might be considered later if her circumstances or coverage needs evolve.
Disclaimer: The above calculation is just an example. 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?
1. Assess Your Life Goals
Start by thinking about what you want to achieve in life. Are you focused on supporting your family, paying for your children's education, or leaving something behind for your loved ones. Your goals will guide you in deciding how much coverage you need.2. Consider Your Financial Liabilities
List your debts, like mortgages, loans, and other financial commitments. Your life insurance should be enough to cover these, so your family won't be burdened if anything happens to you.3. Evaluate Your Health and Lifestyle
Your health and habits can affect your insurance costs. For example, if you smoke or have pre-existing health conditions, your premiums might be higher. Being upfront about your health helps you find the right coverage.4. Consider Your Estimated Working Years
Consider how many more years you plan to work before retirement. Your coverage should last until retirement to ensure your dependents are financially secure. Plus, you will want to choose a policy with premiums you can afford during these working years.5. Use a HLV Calculator
An HLV calculator can help you determine how much coverage you need by considering your income, expenses, debts, and investments. It combines all these factors to estimate better the coverage amount that’s right for you.Factors to Consider Before Buying a 50 Lakhs Term Insurance Plan
1. Financial Assessment
Determine the appropriate coverage by evaluating your personal needs, current liabilities, future expenses, and the amount required to protect your family. Ensure the plan aligns with your financial objectives.2. Claim Settlement Ratio
The claim settlement ratio indicates the percentage of claims an insurer has settled in a given year. A higher ratio suggests a greater likelihood of your claim being processed smoothly.3. Premium Affordability
Ensure the premium is within your budget. Compare options from different insurers and decide on a payment plan that suits you, whether it's regular payments, a single lump sum, or various frequencies like annual, biannual, quarterly, or monthly.4. Term Duration
Select a policy term that matches your financial responsibilities. For example, if you need coverage to match a loan duration, choose a term that aligns with the loan period. For early earning years, a shorter term might be appropriate, with a plan to reassess as your responsibilities grow.5. Rider Options
Evaluate additional riders, such as critical illness coverage, accidental death benefits, and premium waivers in case of disability. These riders can provide extra protection tailored to your needs.6. Policy Exclusions
Review all policy exclusions to avoid surprises when you need to claim. Understanding where your policy may not provide coverage will help set realistic expectations and facilitate 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 50 Lakhs Term Insurance Plan Rejection
1. Suicide
Insurance policies typically include a suicide clause, which often states that if the insured commits suicide within a specified period (usually one or two years) from the start date of the policy, the claim will not be paid.
Additionally, if the insurer suspects that the application is an attempt to exploit this clause, they may reject the policy.
2. Participation in Hazardous Activities
Individuals involved in high-risk activities such as skydiving, scuba diving, motor racing, and other extreme sports are deemed high-risk. Insurers may reject applications or impose higher premiums to account for the increased risk of death.3. Self-Inflicted Injuries
Policies generally exclude coverage for deaths resulting from self-inflicted injuries. If there is evidence that the applicant has a history of self-harm or suicide attempts, coverage may be denied.4. Criminal Activities
Deaths resulting from criminal activities, including involvement in illegal acts, violence, or membership in criminal organisations, are usually excluded from coverage. Insurers may also reject applicants with a criminal record to mitigate risk.5. Substance Abuse
Abuse of substances such as alcohol or drugs 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, such as chronic diseases like diabetes, heart disease, or cancer, are considered high-risk. Insurers may either reject these applications or offer coverage with exclusions and higher premiums.7. War and Terrorism
If an applicant is involved in a profession or resides in a region prone to war or terrorism, the insurer may deny coverage to avoid potential large-scale claims.8. Non-Commercial Aviation
The risk associated with aviation accidents is significant. Insurers may refuse to accept applications or charge higher premiums for individuals engaged in aviation activities outside of commercial airline travel, such as pilots, crew members, or frequent flyers in non-commercial aircraft.Tax Benefits for 50 Lakhs Term Insurance Policies
Section 80C: Premium Payments
Under Section 80C, you can claim a tax deduction on the premium paid for your term insurance policy, with a maximum limit of 1.5 lakh INR annually. This benefit applies to both individuals and Hindu Undivided Families (HUFs).
Eligibility:
- The premium should not exceed 10% of the sum assured for policies issued on or after April 1, 2012.
- The premium should not exceed 20% of the sum assured for policies issued before April 1, 2012.
Section 10(10D): Maturity Benefits
According to Section 10(10D), any amount received from your term insurance policy, including the death benefit, is exempted from tax.
Conditions to Qualify:
- The premium must not exceed 10% of the sum assured for policies issued on or after April 1, 2012.
- The premium must not exceed 20% of the sum assured for policies issued before April 1, 2012.
- If your policy does not meet these conditions, a Tax Deducted at Source (TDS) of 5% will apply if the payout surpasses 1 lakh INR in a financial year.
Section 80D: Health Riders
Section 80D provides additional tax deductions if your term insurance policy includes health-related riders such as critical illness or accidental death coverage.
Deduction Limits:
- If you are below 60, you can claim a deduction of up to 25,000 INR.
- As a senior citizen, you can claim a deduction of up to 50,000 INR.
A ₹50 lakh term insurance plan offers an affordable and essential safety net for your family's financial security. With premiums starting as low as a daily cup of coffee, this plan protects your loved ones from life's uncertainties.
However, an average-earning individual should at least plan to buy a 1 crore term insurance policy. Whether starting a family or planning for the future, this policy provides peace of mind and a solid foundation.
FAQs about 50 Lakh Term Insurance Plan
Are there any tax benefits in a 50 lakh term insurance plan?
What is the premium for a 50 lakh term insurance plan?
What are the eligibility requirements for a 50 lakh term plan?
Are there any tax benefits in 50 lakh term insurance plans?
What is 50 lakh return policy?
Is a 50 lakh term insurance plan sufficient for my family's financial needs?
What factors influence the premium of a 50 lakh term insurance plan?
How can I find the most affordable 50 lakh term insurance plan option without compromising coverage?
Can I increase the sum assured of my 50 lakh term insurance plan in the future, and if so, what are the associated costs and procedures?
How do riders like affect the premium and overall benefits of my 50 lakh term insurance plan?
In the event of my untimely death, how can my family ensure a smooth claim settlement process and avoid delays or complications?
What health conditions or lifestyle factors might affect my eligibility for a 50 lakh term insurance plan?
After the initial term, can I convert my 50 lakh term insurance plan to a whole life insurance policy?
How often should I review my 50 lakh term insurance plan to ensure it remains aligned with my evolving financial circumstances and family needs?
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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