Choosing a term life insurance policy is one of the major decisions critical for securing your family’s financial future. Of the many alternatives available, one that has emerged as very popular among people, touching on Rs 50 lakh term insurance, raises an important question. Is a term policy of 50 lakh rupees good enough to make your dear ones financially secure in the event of your unfortunate demise? It would, however, be prudent to look at the family’s financial requirements and future needs alongside possible hurdles that may crop up.
Term Insurance
Term life insurance is a very basic yet efficient financial product. This means that the person should periodically pay a certain premium over a period to be available for coverage for a given time. If the insured passes on during the period, the beneficiaries will receive the sum assured or coverage amount. All that term life insurance is for your dependents when you die, earning no income and requiring money. Assured sum is one of the major determinants for term life insurance selection.
1. Your Family’s Current and Future Financial Needs
The first step in assessing the adequacy of a 50 lakh term insurance policy is to calculate your family’s current financial needs. Consider the following:
- Living Expenses: Your family’s day-to-day expenses, including rent, utilities, groceries, and other essential costs, must be factored in. If you’re the primary earner, your family may struggle to meet these expenses in your absence.
- Education Cost: Education is the largest repeat expense for someone who has kids. If they are currently in school, you must already be shelling out large amounts of cash on tuition as well as clubs, sports and so on, etc. So far, there isn’t anyone born with your last name whose school career starts this fall so don’t begin spending just yet.
- Outstanding Debts: Any kind of loan, which would include the EMI on the house, personal loan, and car loan for determining coverage is adequate, for example, one’s liability and debts exceed more than Rs. 50 Lakh of Term Insurance covers as it clears off all his or her outstanding liabilities.
- Healthcare and Medical Cost: Healthcare can be underestimated to be a substantial burden. Having health insurance covers many medical costs but not the whole of medical costs. It pays to have reserve funds to support any health issues that may arise among your family in the future.
- Retirement Planning: If you’re nearing retirement or planning for a comfortable life post-retirement, ensuring that your family can continue to invest for their future is crucial. A 50 lakh sum assured might not be sufficient to replace a lifetime of income and savings required for your family’s retirement plans.
2. Replacement of Income
In the absence of your income, your family will need to replace the lost financial support.
Ideally, the sum assured for life insurance should suffice to provide the family’s long-term living expenses. The general thumb rule is that your sum assured must be at least 10 to 15 times your annual income. So if your annual income is 5 lakh rupees, a 50 lakh term insurance policy may well be adequate for your family. This also goes hand in hand with the factor of inflation. With time, the value of money is lost, and living costs, medical expenses, and education expenses shoot up. The same 50 lakh today would not be as valuable tomorrow; hence, getting inflation-indexed coverage becomes vital.
3. The Dependent Ones You Are Protecting
The more dependents you have and the future needs they may have are of great importance. For instance, if you have a spouse and two young children, your family’s financial needs will be very different compared to someone who has only one dependent or grown-up children. The larger the family is and the longer the dependents will need support, the more coverage is needed. The period that your dependents will depend on your income must also be ascertained. If you have small children, education and cost of living is long-term even stretching to several decades. Other dependents include your elderly parents; their needs are also covered under the sum assured.
4. Inflation and Rising Costs
Inflation is a very important factor in long-term financial planning. The cost of living, education, healthcare, and everything else increases over time. What might be a good amount today to cover for your family, a 50 lakh term insurance policy, might not be sufficient to maintain their lifestyle in 10 or 20 years. Also, there are lifestyle changes, like the increase in the size of the family or the requirement for bigger houses, which will further stretch your family’s wallet. A 50 lakh amount today may be sufficient, but future uncertainties must be considered while assessing your insurance needs.
5. Other Available Assets
Another important factor is the assets you already have in place.
For example, if the savings amount, or any investments, or retirement savings, these can be some kind of added support to your family. This life insurance cover, it is very important that should be well balanced with other financial assets. While 50 lakh term insurance might be alright for the short term, what is important is ensuring your overall financial portfolio is strong enough to keep your family going in the long term.
6. Best Term Life Insurance Option
If considering 50 lakh term insurance whether they can meet one’s requirements or not, then automatically the best term life insurance plan should be selected. Best insurance plans are flexible, affordable, and comprehensive wherein the financial requirements of any family do not get distressed due to unforeseen future situations. A 50 lakh term insurance plan is suitable for any individual, but each family has its own requirements. You must, therefore, conduct proper analysis of your financial requirements, goals, and obligations to make the right decision.
Conclusion
Thus, a 50 lakh term insurance policy may be sufficient for some, while for others it may not suffice. Hence, one should consider his or her family’s current and future needs, income replacement, outstanding debts, healthcare costs, inflation, and any other assets or resources available to them so that their family’s future is adequately protected.
While a term insurance policy with a sum assured of 50 lakhs is usually a good beginning for most people, larger families or more complicated financial needs often require a more significant sum assured. With thorough assessment of the situation, a better decision can be made, so that no matter what life takes away, it will be returned to your family.
