Middle-class households are largely dependent on their paychecks to sustain the daily necessities of life. Losing the primary wage earner can be devastating to their financial planning and the well-being of the entire household.
If you are the primary wage earner in your family, you need to take precautionary measures to ensure that in the event that they lose you, their livelihood is not hampered. That is why term insurance plans are such a godsend solution for the middle-class household.
Why 50 lakh term insurance is an ideal coverage for middle-class families?
Term insurance is a financial instrument that helps protect the future of those you love, without overwhelming your current financial situation. A term insurance policy is available for very reasonable premiums, which makes it a popular choice for middle-class families looking for the ideal life insurance plan.
You can choose the tenure of a term insurance plan for as low as 10 years to as high as 99 years, which would be a whole life policy. The coverage, i.e., the sum insured, depends on the expenditure of your household and an estimate of their future financial needs.
Ideally, for a middle-class family, 50 lakh term insurance is a decent coverage. The policy is available for a low rate of premium, especially if you purchase the plan at an early stage in your life. You can choose the tenure based on your average life expectancy which can be estimated based on your health, area of residence, and how cautious a life you lead.
How to calculate term insurance for your family?
To calculate whether 50 lakh term insurance is enough for your loved ones, you need to consider the following:
- The current household expenses
- Any liabilities you have, such as debts, loans, and mortgages that your loved ones would have to repay.
- The inflation rate would affect the 50 lakh term insurance value in the future.
Based on these estimations, you can determine if a 50 lakh term insurance is sufficient coverage or if you need a higher sum insured. There are also term insurance policies available for 1 crore coverage and higher for your convenience.
Term Insurance Benefits
A term insurance policy can be a lifesaver for your loved ones as well as your current personal finances. The term insurance benefits are as follows:
- It provides financial stability for the family when they lose their primary wage earner. A 50 lakh term insurance would pay the sum insured as a death benefit to your loved ones in the event of your unfortunate demise during the policy tenure.
- There are various types of policies available, and the term insurance benefits for each are listed below:
- Increasing term plan –
It helps increase the coverage of your term insurance annually. Therefore, if you have a 50 lakh term insurance plan, every year, the 50 lakh coverage would be incremented. If you survive the policy tenure long enough, your family will receive a much higher death benefit. - Decreasing term plan –
The sum insured for your term plan decreases annually. The insurance provider helps repay liabilities such as mortgages, loans, and debts with the difference in the sum insured. Ergo, your family will have fewer liabilities to worry about upon receiving the death benefit, even though the settlement amount will be lower. - Level term plan –
If you don’t want any modifications in the term insurance benefits, the level term policy is perfect. The sum insured remains the same, and so does every other variable. Therefore, your beneficiaries will receive the full amount as per the original contract. - Single premium term plan –
If you have an unstable source of income, you can pay the premium once in a lump sum amount and secure the policy plan. - Term insurance with return of premium –
If you survive the entire tenure of your term insurance plan, then the insurance provider will return the entire premium that you paid as a maturity benefit. You will receive a lump sum amount that you can use for various financial obligations.
- Increasing term plan –
- Term insurance benefits also include tax exemptions under Section 80C, 80DDB and 80DU. If the premium for your term insurance is less than 10% of the sum insured and less than INR 1.5 lakhs annually, then the amount you spend on premiums is tax deductible. Also, if you have a disability or a critical illness, then the premium is tax deductible up to 15% of the sum insured.
- Additionally, the death benefit that your family receives upon your demise is also exempt from taxation.
Conclusion
A 50 lakh term insurance provides sufficient bank balance for your beneficiaries. This would be a large sum of money that could benefit a middle-class household in dealing with financial obligations and planning for the future. You can always increase the coverage with alternative term plans but 50 lakhs would be the basic ideal amount to take care of your loved ones in your absence.
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