When it comes to securing the future of your family, one of the easiest and best tools is a term insurance plan. It guarantees that in case something untoward happens to you, your family is well taken care of. But how to choose the right sum assured is tricky. A lot of people question whether a ₹50 lakh term insurance policy is enough, excessive, or perfectly okay. Here we will explain it in layman's terms and guide you through the advantages and disadvantages of a ₹50 lakh plan.
A term insurance policy is a form of life insurance that pays a set amount of money to your loved ones if you die while the policy is still in effect. It is not an investment or savings vehicle like other insurance policies. This means it is lower-cost and simpler to purchase. The primary goal is straightforward: protection for your family.
For instance, if you purchase a 20-year term plan and something goes wrong with you in between, your family receives the amount assured. If nothing goes wrong, there is no claim. Some individuals like those plans that have savings benefits, but a pure term plan solely concentrates on protection, which keeps the cost lower and the coverage higher.
Why People Consider ₹50 Lakh Term Insurance
A 50 lakh term insurance policy is a mid-to-high coverage policy in India. Most individuals opt for this sum since it can fulfil significant financial obligations. Let's find out what it can accomplish:
● Debt Repayment – Suppose you have loans, such as a house loan or personal loans; ₹50 lakh can be utilised to settle them, so your family is not burdened.
● Children’s Education – This amount can provide for your children’s education and other long-term needs.
● Living Expenses – ₹50 lakh can act as a financial cushion for your family to maintain their current lifestyle for several years.
● Emergency Funds – It can help your family handle emergencies without worrying about money.
The idea is to give your family enough coverage so that they can live comfortably, even in your absence. But is ₹50 lakh always enough? Not necessarily.
Pros of Choosing a ₹50 Lakh Term Insurance Plan
Choosing a ₹50 lakh term plan comes with several benefits:
1. Affordable Premiums: As compared to higher coverage policies such as ₹1 crore and above, a ₹50 lakh term policy is generally cheaper. This implies that you can have adequate protection without breaking your monthly budget. Premiums are based on your age, health, and policy duration, but overall, a ₹50 lakh plan is simpler to incorporate into your budget.
2. Addresses Most Basic Needs: For most families, ₹50 lakh is sufficient to repay home loans, children's education, and living expenses for some years. It can also serve as a cushion for emergencies, lessening the burden of money worries.
3. Easy to Purchase and Maintain: Term plans are easy to comprehend and need no complicated investment choices. A ₹50 lakh plan is easy: pay the premium periodically, and your family receives the payout in case of your untimely demise. There's no necessity to monitor market performance or be anxious about returns.
4. Tax Benefits: Prepaid premiums for term insurance policies are tax-deductible under Section 80C of the Income Tax Act. The amount your family gets in the event of your death is also usually tax-free. Term insurance is thus both defensive and tax-effective.
Drawbacks of Selecting a ₹50 Lakh Term Insurance Policy
Though a ₹50 lakh term policy may be useful, it has some downsides you need to know:
1. Might Not Be Sufficient for Large Families
If you have more children or significant financial liabilities, ₹50 lakh may not be enough for all your family's needs. For instance, if your kids are young, the price of higher education, weddings, and other long-term charges can surpass ₹50 lakh.
2. Inflation Lowers Value
Money in the present does not remain the same as money in ten or twenty years. Inflation can lower the value of ₹50 lakh in the long run. What appears adequate currently might prove to be inadequate in the future, particularly for long-term goals such as education or retirement.
3. No Benefits of Investment
A term insurance plan provides only protection and not savings, investment return, or bonuses as in the case with some endowment plans. Therefore, if you need to increase wealth while covered, you may require additional investments in addition to your term plan.
4. Limited Flexibility
Most term insurance policies have a fixed term and sum assured. If your financial requirements change later, you might have to purchase more coverage or raise your sum assured. Some companies permit adding coverage later, but at an increased premium.
How to Choose if ₹50 Lakh Is Appropriate for You
Selecting the optimal term plan sum assured is a function of your individual financial profile. Consider the following questions to make your decision:
● Do you have loans or debts?
If affirmative, make sure the amount assured is sufficient to settle all the liabilities.
● Do you have dependents?
Think of your spouse, children, and aged parents. Ensure the insurance covers them economically.
● What are your long-term objectives?
Consider children's education, wedding expenses for your spouse, retirement savings for your spouse, and daily living costs.
● Are you able to pay for increased coverage?
Occasionally, shelling out a bit more for ₹1 crore coverage is cheaper in the long term.
One easy way to do the calculation: include your outstanding loans, future bills, and a cushion for everyday expenses. Compare it with the ₹50 lakh cover. If it is less, then you may require a higher sum assured.
Tips for Maximising a ₹50 Lakh Term Plan
Even if you are opting for a ₹50 lakh cover, you can maximise it with a few tips:
● Choose a Longer Term: Insure yourself until your dependents become financially independent.
● Consider Riders: Riders such as critical illness, accidental death, or waiver of premium can complement your coverage at minimal cost.
● Review Regularly: Re-evaluate your plan every few years so that it still continues to suit your family's needs.
Conclusion
A ₹50 lakh term insurance policy can serve as a good foundation for most families. It offers basic protection, is inexpensive, and is simple to handle. But it might not even cover families with larger financial responsibilities or long-term aspirations. The trick is to weigh affordability against adequate cover. Consider your liabilities, dependents, future costs, and inflation. If ₹50 lakh is sufficient for present needs, it's a good option. But if you prefer greater peace of mind and long-term security, you may opt for higher cover or extra plans.
Keep in mind, a term insurance plan is all about securing your loved ones when they need you the most. The selection of the right amount helps them sustain their lifestyle and fulfil their dreams, even without your presence. Ultimately, whether ₹50 lakh is appropriate for you is something only you can determine. Look closely at your finances, plan, and make the decision that feels right to you. And remember, financial security isn't about the math, although, of course, it's a factor; it's about peace of mind for yourself and your loved ones.
