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These days, having a financial plan to substantially grow your net worth is a major requirement. For individuals with very high net worth, it is important to consider your current financials as well as those of your loved ones in the future. That is why, a term insurance plan with a high sum assured is ideal.
What is a term insurance policy?
A term insurance plan is a financial instrument that helps provide financial security to your loved ones in the event of your demise. These policies are available for very affordable rates for shorter tenures with larger sums assured.
You can choose the coverage for your term insurance based on a careful consideration of your finances and the needs of your loved ones. The insurance provider will determine the premium based on the sum assured, policy tenure, your medical history, any riders on your policy, and your premium paying terms. If you pass away during the tenure of the plan, then your beneficiaries receive the sum assured as a death benefit to see them through financially tough times.
Whether you select INR 50 lacs coverage or a 5 crore term insurance plan, as long as you pay the premiums, your beneficiaries are entitled to the death benefit.
How to calculate sufficient coverage for term insurance?
In order to calculate the coverage required to secure the future financials of your loved ones, you will have to consider several factors about your finances. Here are some of the factors to consider when determining the coverage for your family:
- Your income vs expense ratio
- Fixed monthly expenses
- Variable annual expenses
- Liabilities such as debts, mortgages, etc.
- Rate of inflation
- Total number of dependants
Once you determine the coverage required for your family, you can use a term insurance calculator to figure out the premium. You will have to feed the following details into the term insurance calculator honestly to determine a customised premium plan for you:
- Your maximum level of education
- Your occupation
- Your net annual income
- Your area code or PIN code
- Your gender
- Your date of birth
- Any smoking habits or related lifestyle choices involving tobacco
- Your personal details such as name, phone number, and email ID
The term insurance calculator will use these details to narrow down a list of customised term insurance plans for you. You can choose the type of policy that fits your requirements and supply the required documentation, then feed the following details into the term insurance calculator in the next steps:
- The coverage you desire
- The tenure of the policy
- The duration of paying premiums
- The frequency of premium payments
- Mode of payment for death benefit.
These additional pieces of information help the term insurance calculator to figure out the ideal rate of premium for your policy.
Why is 5 crore term insurance a good plan for individuals with high net worth?
Individuals with high net worth also have higher expenses. Considering your lifestyle choices and the requirements of your loved ones, you may want to consider a 5 crore term insurance policy.
While high net worth is an excellent facet, it also breeds higher liabilities. These could be due to business expenses, mortgages, upcoming life stages, or personal financial decisions. Nevertheless, in the event of your demise, the burden of settling said liabilities falls on your loved ones.
Since the expenses are higher and so are the arrears, it is only fitting that as an individual with a high net worth, you secure the future of your loved ones with as large a sum assured as possible. Therefore, a 5 crore term insurance is ideal for individuals with high net worth.
Based on the type of term insurance plan you pick; your beneficiaries will receive the death benefit in the form of INR 5 crores. They can use the benefits of your 5 crore term insurance plan to pay off any remaining liabilities such as debts, loans, and mortgages. They can also plan for their financial future, be it starting a business, furthering their education, or taking on the reigns of the family trade. They can further utilise the 5 crore term insurance settlement to pay for major life stages such as marriage, children, purchasing properties, and more.
Conclusion
A 5 crore term insurance policy offers huge financial benefits to your beneficiaries. It makes it easier to navigate future financial decisions without stress. As an individual with a high net worth, you can take the term insurance tax benefits into account along with the coverage required for your family’s well-being. Not only will your loved ones benefit from the lumpsum payout, or monthly earnings, as per your choice, but you can also save money during the course of your life.
Using a term insurance calculator, you can figure out the premiums that you will need to invest for your family to reap maximum benefits from a 5 crore term insurance policy.