Buying term insurance is a crucial financial commitment. It is not something that can be determined by guessing a number. Before one buy term insurance, many people have one question in common: Is term insurance of 2 crore sufficient?
The response is straightforward. For some individuals, term insurance of 2 crores may be sufficient, but it cannot be generalised to all. Such factors as income, family needs, and financial liabilities determine the correct amount. This article presents the whole issue in a luminous and well-organised manner, so you can evaluate your life insurance requirement exactly.
Table of Contents
What is Term Insurance?
Term insurance is a life insurance policy that, in case of the death of the insured, provides financial support to his/her family. Nominee gets a definite sum from the insurance company if the insured dies during the term of the policy. This sum aids the family in coping with the expenses and managing financial stability.
The main reason behind the wide acceptance of term insurance is:
- High cover for low premium
- Only protection is targeted
- Simple to comprehend
For these reasons, finance specialists strongly recommend that people download term insurance as early as possible.
Why Is a 2 Crore Term Insurance a Typical Selection?
So many people opt for a 2 crore term plan because:
- It is perceived as a big and secure sum.
- The premium is still within reach.
- Insurance agents normally suggest it.
- People think it will suffice for all their needs.
But then again, selecting a lump sum without going through the calculations may end up getting you underinsured.
Would ₹2 Crore Term Insurance Be Sufficient For You?
The correct response to this inquiry is personal to each one of us. Nonetheless, the following pivotal elements can help you decide your coverage amount.
1. Annual Income
When it comes to the consideration of term insurance amount, income is a key factor.
There is a typical rule of thumb:
The amount of term insurance cover should be 15 to 25 times your yearly income.
For instance:
- Annual income: ₹10 lakh → Required coverage: ₹1.5–2.5 crore
- Annual income: ₹15 lakh → Required coverage: ₹2.25–3.75 crore
- Annual income: ₹25 lakh → Required coverage: ₹3.75–6 crore
If you have a hefty paycheck, a ₹2 crore life insurance policy might not be adequate.
2. Your Family’s Monthly Expenses
Find out the exact amount of money your family will need every month to lead a decent life.
The following should be included:
- Rent or home loan EMI
- Food and utilities
- Tuition or school and college fees
- Medical and daily expenditures
Then, tell how many years the family will be relying on that amount.
For instance:
- Monthly expense: ₹50,000
- Yearly expense: ₹6 lakh
- Dependency period: 25 years
Even this is ₹1.5 crore just for the base without adjustment for inflation.
3. Existing Loans and Liabilities
All outstanding loans must be included in the term insurance.
This includes:
- Home loan
- Car loan
- Personal or business loan
- Credit cards
In case your total loans stand at ₹80–90 lakh, that amount will be subtracted from the insurance, and your family will be left with less money.
4. Education and Future Expenses for Children
If you have kids, you will have to project the future expenses very cautiously.
The below mentioned are some of the items:
- School education
- College/professional courses
- Higher studies in India or abroad
- Marriage
Education costs increase every year. Your term insurance must be large enough to cover these ever-increasing costs.
5. Your Spouse’s Financial Dependence
If your spouse:
- Does not earn
- Earns less than you
- Depends on your income
Then higher life insurance coverage is necessary to ensure long-term financial security.
When Is 2 Crore Term Insurance Enough?
2 crore term insurance may be sufficient if:
- Your annual income is below ₹10–12 lakh.
- You have minimal or no loans.
- You live a simple lifestyle.
- You already have strong savings and investments.
- Your spouse has a stable income.
When Is 2 Crore Term Insurance Not Enough?
You may need more than 2 crore if:
- Your income exceeds ₹15 lakh per year.
- You have a large home loan.
- You have young children.
- You live in a metro city with high expenses.
- Your family fully depends on your income.
In such cases, 3 crore or higher coverage may be more suitable.
How to Calculate the Correct Amount of Term Insurance
Use this easy technique:
Step 1: Total Expenses
- Annual family costs × years of dependency
- Costs of children’s education and marriage
- Emergency medical fund
Step 2: Total Liabilities
- All pending loans
Step 3: Existing Savings Subtract
- Fixed deposits
- Mutual funds
- EPF and other investments
The last amount gives a realistic concept of how much term insurance you should purchase.
Can You Purchase More Than One Term Insurance Policy?
Absolutely, you can take term insurance from more than one company.
Many prefer:
- One main policy
- One supplemental policy for more coverage
This way one does get the most out of his/her financial planning and flexibility.
When Is the Right Time for You to Get Term Insurance?
The absolute right time to get insurance is as soon as you can.
The earlier you buy, the better it is for:
- Less premiums to be paid
- Fewer medical issues to be listed
- Longer period for coverage
Delaying might mean more risk and cost.
Conclusion: How Much Term Insurance Should You Get?
There is not a fixed number that applies to all.Term insurance of 2 crore rupees is not a rule to be followed. It might be good for some but not for all.
The amount of your insurance should depend upon:
- Your earnings
- Family requirements
- Your debts
- Your aspirations
Life insurance is for your family’s protection and not for attracting attention on policy documents only. Hence, do a detailed calculation and purchase term life that truly caters to your family’s future. An adequately planned life insurance policy ensures financial stability even in your absence.
