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5 Crore Term Insurance

Every working person strives hard to ensure their loved ones enjoy a secure future. You put away savings and invest for a better tomorrow. Every good financial plan also includes a term insurance policy, particularly the 5 crore term insurance plan, best term insurance plan for 1 crore etc. These life insurance products offer high life coverage for a limited period. Since term plans are pure life insurance products, you benefit from a high sum assured at an affordable premium.

To delay is to regret

You may not always be around to take care of your family. And that’s when a term plan ensures your family is well protected.

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TERM INSURANCE PLANS BUYING GUIDE
Term Insurance

Why Do I Need Rs 5 Crore Term Insurance?

Why Do I Need Rs 5 Crore Term Insurance?
October 29, 2024

Table of Content

 

What Is a Rs. 5 Crore Term Insurance?

A term plan that offers a sum assured of Rs. 5 crores is called a 5-crore term policy. You can purchase the policy for a limited time, during which you enjoy life coverage worth Rs. 5 crores. If something happens to you during the policy tenure, your beneficiary receives the Rs. 5-crore payout.

Why Buy Rs. 5 Crore Term Insurance?

You must select the correct sum assured whenever you purchase a term life insurance plan. Understanding the right amount can seem tricky. As a general rule of thumb, you should opt for a sum assured 10 to 15 times your current annual salary. You should also add any outstanding debts to the amount. Using this formula should provide your family with an amount that will help them replace your lost income in the future and pay off any debts. Individuals who earn between Rs. 30 lakhs and Rs. 50 lakhs per year benefit the most from a term plan worth Rs. 5 crores.

Here are some of the top reasons to buy a 5 Crore term insurance:

  • Large Coverage at Affordable Premiums

    • It is an assumption that a 5 crore term insurance has high premiums. However, it is not so. If you invest in a 5 cr term insurance plan early in life, you can benefit from high coverage at an affordable premium. Suppose the sum assured for a 5 crore sum assured seems high then you can go for 2 crore term insurance. 

  • Extra Coverage Benefits

    • A 5 cr term insurance plan has scope for extra coverage through add-on covers. The coverage is enhanced with riders for critical illness, accidental death, or premium waiver. With these riders, you can get financial assistance for the treatment of any terminal illness during the policy tenure, an extra payout for your family in case of accidental death, and a waiver of premium while keeping the policy active in case of any eventuality during the policy term.

  • Financial Assistance

    • To not leave your family in a financial lurch, you may be earnestly trying to clear your loans on time. But your untimely demise may pass on the burden to your family. A 5 crore term insurance plan provides a death benefit in case of an eventuality and ensures that your loved ones can pay off the outstanding debts and take care of other requirements like children’s education, medical emergencies, and monthly expenses.

  • More Space For Investments and Savings

    • 5 crore term insurance premium is affordable for longer tenures. You can take advantage of higher coverage with a low premium if you purchase the plan early in life. With your family’s financial future secure, you can upgrade your investments and savings to align with your long-term financial goals. You can park your funds in tools like fixed deposits, mutual funds, shares and stocks, etc., depending on your risk tolerance and objectives.

How Does a Rs. 5 Crore Term Plan Work?

Aditya, a married father of two, decides to purchase a term plan in his early 30s. He earns quite well and wants to safeguard his family’s financial future. His spouse stays home to look after their children. He chooses a policy tenure of 30 years and a sum assured of Rs. 5 crores. A few months after his 45th birthday, Aditya has a fatal heart attack. His wife and children are devastated as they lost their sole breadwinner. Thanks to his prudent planning, his wife receives a payout of Rs. 5 crore that allows her to pay off the outstanding debt for their home loan. It also provides her with enough to pay her children’s school fees and maintain their standard of living until she can find another source of income.

What Are the Benefits of Rs. 5 Crore Term Insurance?

Here are some of the top benefits of buying a 5 crore term insurance:

  • Affordable Premiums

    • The unique feature of a 5 crore term insurance plan is the affordable premium. The plan provides higher coverage for low premiums, especially if you invest when you are younger. With the family’s financial security in place, you can focus on other investments and savings to match your financial goals.

  • Options for Extra Benefits

    • A 5 crore term insurance plan provides comprehensive benefits. In addition, it provides extra benefits in the form of riders. You can opt for a waiver of premium, accidental death benefit, permanent/partial disability, or critical illness riders for an extra premium for specific emergencies. For example, if you are diagnosed with a terminal illness during the policy term, you will receive a lump sum amount for the treatment if you opt for a critical illness rider.

  • Death Benefits

    • The insurance company provides a death benefit equivalent to a predetermined sum assured to the nominee/beneficiary in case of your untimely death during the policy duration. Your family will not go through a financial crisis in your absence and they can utilise the amount for their requirements.

  • Improved Investment and Savings Options

    • A 5 crore term life insurance plan provides a death benefit that serves as a financial safety net for your family. Without having to worry about your family's financial future, you can focus on other investment and saving options like fixed deposits, mutual funds, equity, bonds, etc., to achieve your financial goals and also have ready funds for emergencies.

  • Online Accessibility

    • With the facility to purchase the 5 crore term insurance plan online, you can buy the policy from anywhere and at any time. This eliminates the need for multiple visits to the insurance company and waiting in long queues. Further, the convenience of comparing the plans of various insurance providers helps you make an informed decision.

  • Flexible Payment Choices

    • Another advantage of 5 cr term insurance is the premium payment flexibility. You can opt for a single premium payment, limited premium payment, or regular premium payment. A single premium payment is a one-time payment, a limited premium payment is for a specific term, and a regular premium payment is paying a premium regularly for a longer tenure.

Who Should Consider Buying 5 Crore Term Insurance?

The investment in a 5 crore term insurance plan is made flexible depending on individual needs and requirements. Anybody can buy this policy as it is not restricted to any category. However, the plan is more suitable for some categories, as mentioned below:

  • Young professionals

    • Young professionals aged between 20 to 30 should consider the 5 cr term insurance plan. They generally have robust health and get higher coverage at economic premiums. These individuals have time to their advantage and can invest for longer tenures to derive the benefit of sumptuous cover at a premium within their budget.

  • Family Members

    • There is no defined age group to invest in the 5 crore term insurance policy. However, the plan is best suited for persons between 25 and 40 years. This is the life stage when responsibilities escalate as they may get married and have children, and financial protection for the family becomes a priority.

  • Sole Earning Members

    • If you are the sole earner of a family, consider investing in a 5 cr term insurance policy since the entire family is financially dependent on you. The term plan will protect them from facing a financial crisis in your absence.

  • Taxpayers

    • For individuals with an income between 30 to 50 lakhs, investing in a 5 crore term insurance plan paves the way for a beneficial investment while reducing the tax burden. The premiums paid towards the insurance plan are eligible for tax deduction under Section 80C of the Income Tax Act 19611

  • Debtors

    • If you have incurred heavy debts to fulfil your financial goals, investing in a 5 crore term insurance policy will avoid the financial burden on your family if anything untoward happens to you during the policy term. With the death benefit, they can clear the outstanding liabilities and be stress-free.

How to Choose the Right Rs. 5 Crore Term Insurance Plan?

When looking for a Rs. 5 crore term policy, you should consider the following crucial points:

  • Premiums

    • Term policies offer high coverage at affordable rates. Always compare the premiums various term insurance providers offer before selecting a plan.

  • Claim Settlement Ratio

    • Every life insurance company must inform policyholders of their claim settlement ratio. It lets you know how many claims the company settled of all requests received. A higher ratio indicates that your beneficiary will likely receive the payout.

  • Add-ons

    • Always check the add-ons that various insurance companies offer. You could boost your coverage and enhance your family’s financial future by selecting the add-ons that suit your needs. For example, there are types of term insurance like the term insurance with accidental death benefit or the term plan with return of premium that can be availed with add-on riders.

Things That Impact the Cost of 5 Crore Term Life Insurance

The term insurance plan you buy should be adequate to cover your family’s requirements in your absence and must be easy on your pocket as well. Understand the factors that impact term insurance premiums before you purchase a policy. Consider the following factors before investing in the 5 Cr term plan:

  • Tenure

    • Investing in the 5 crore term plan when you are younger gives you the benefit of longer tenure. The premiums are lower for longer tenure and higher for shorter tenure. So, you can get higher coverage for an affordable premium.

  • Premium Payment Term

    • The premium payment term defines the outflow of the total premium. The shorter the premium payment term, the higher the premium outflow, unlike the regular premium payment option where the premium payment term is equal to the policy term.

  • Existing Health Condition

    • Your existing health conditions determine the risk factor for the insurance company. If you have existing health issues, the risk is higher, and the premium will be proportionately higher. If you have robust health when you apply for the term plan, the premium will be considerably lower.

  • Lifestyle

    • Smoking and alcohol consumption are considered hazards that give rise to several health issues. If you have such lifestyle habits, the premium for the term insurance will be higher as the risk involved is higher.

  • Age

    • The age of the policyholder has a significant impact on the cost of a 5 crore term insurance policy. If you invest in a policy when you are younger, you can opt for a longer term and get the benefit of higher coverage at a lower premium.

How to Figure Out the Right Coverage Amount?

To determine the right coverage for your family’s financial security, consider the following factors:

  • Your Yearly Earnings

    • The golden rule to ascertain the right coverage amount is that it should be 10 times your annual income. This rule considers the inflation rate and helps beat the future price rise. This will provide adequate coverage for your family to meet their requirements without digging into savings.

  • Current Age

    • Age plays a critical role in determining the right coverage. If you invest at an early age when you are healthier, you can opt for a long-term insurance plan at a lower premium. As you age, your health deteriorates, and the premiums for term plans also are higher. Buying term insurance at a young age provides the benefit of lower premiums with financial security for your family for a longer duration.

  • How Many Dependents You Have and What They Need

    • When you plan for financial security for your family, consider the number of persons financially dependent on you and their requirements. The coverage should be adequate to meet all their requirements like education, marriage, loan repayments, etc.

  • Outstanding Loans and Debts

    • Along with other needs of your family, you should also consider the loans and debts you have incurred to determine the coverage. With a 5 crore term insurance, your family should be able to meet their requirements even after paying off the outstanding debts. A term plan ensures that the burden of repaying debts does not pass on to your family in your absence.

Summary

Life is uncertain, and planning for your family’s financial security should be a priority if you do not want your family to be in financial lurch in your absence.  A 5 crore term insurance plan provides high coverage at lower premiums, ensuring that your family is supported financially in your absence. The term insurance plan can be customised with add-on benefits like critical illness rider, accidental death benefits, premium waivers, etc. Invest in the 5 crore term plan to ensure your family has financial protection and can maintain living standards even in challenging times.

FAQs

Q: Is 5 crore term insurance worth it?

A term plan with Rs. 5 crore sum assured gives you peace of mind that your loved ones will be financially secure in your absence. If income replacement to take care of your family’s requirements when you are not around is your goal, then 5 crore term insurance is worth it even if you outlive the policy.

Q: How Can I Calculate the Premium for a 5 Crore Term Insurance Policy?

You can use the online term insurance premium calculator to calculate the premium for a 5 crore term insurance policy. The inputs required for the calculation are age, gender, existing medical condition, lifestyle habits, and the coverage amount

Q: How much term insurance will be enough for my family?

The thumb rule to calculate the right coverage is it should be 10.times your annual income. This will be adequate to meet your family’s requirements and also manage inflation rates.

Q: What Is the Free-Look Period for the 5 Crore Term Insurance Policy?

The free-look period is the time given for the policyholder to review the terms and conditions and cancel the purchase if he/she disagrees with any of the terms and conditions. The period is between 15 to 30 days from the date of receipt of physical documents.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Why Do I Need Rs 5 Crore Term Insurance?

5 crore term insurance provides life coverage to the policyholder. If something happens to you during the policy period, your family will receive a payout of Rs. 5 crores.

Why Do I Need Rs 5 Crore Term Insurance?
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Disclaimers

##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.

#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved

^ Available under Life & Life Plus plan options

  1. As per Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.

*Online Premium for Life Option, Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly premium = 2321/30=77.3)

***Online Premium for Life Option for HDFC Life Click 2 Protect Super (UIN: 101N145V04), Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).

**7% online discount available on 1st year premium only

@As per integrated annual report FY23-24, available on www.hdfclife.com. As of May 2024

ARN - DM/10/24/17098