One Crore – Term Life Insurance – Why You should not take?
One crore term life insurance—is it the right coverage? Many people have questions in their minds.
Why people always ask about 1 crore life term insurance.
There seems to be some mental blocking. Here, in this article, I will explain the reason behind this.
Unable to calculate the term insurance required…
People really do not know the life insurance coverage that they need to take.
I will explain in a simple way.
There are two methods that planners like me will follow to advise life insurance requirements to our clients. They are…
- Human Life value Method
- Need-based Analysis.
For example, if a person is earning Rs. 4,00,000 per year and his age is 30 years. His salary hike expected every year is 10%.
Then, after reducing his self-expenditures and expected future taxes, his present value of net worth in today’s cost will be calculated.
From the above value, the present existing life insurance cover will be reduced to meet the life insurance requirement.
You can use this online life insurance calculator to know the insurance coverage required. Click here to calculate.
When it comes to need-based analysis, we planners will calculate the present value of the loans outstanding and the corpus required for special needs like child education, dependent expenses, house buying, etc. in today’s cost by deducting the discretionary asset value (excluding the own house).
There are so many methods to calculate the life insurance requirement. But most planners will follow need-based analysis.
As most people do not know these methods, they tend to buy random life insurance 1 crore from life insurance companies.
As insurance companies are offering default term insurance for 1 crore…
I have checked some life insurance companies websites; they are offering default term insurance for 1 crore.
As insurance companies are showing a default option of 1 crore, the majority of times people tend to buy a 1 crore term insurance policy.
We take term insurance for 1 crore as our psychology tells about rounding off…
If we are buying Idly, etc. outside, sellers always round off the price.
They will not sell idly for 1.25 rupees.
Similarly, when we require 80 lakh term insurance, we will try to round it off to 1 crore.
This is also one of the reasons we will go for 1 crore term insurance.
Comfort feeling of crorepati term insurance…
A few decades ago, the lakh pati trend is there.
People want to become lakh pati those days.
As rupee value has fallen all these decades, now people are dreaming of becoming crorepati.
Due to the inner feeling of crorepati, people are buying 1 crore term insurance.
Conclusion…
Buying term insurance based on the emotions discussed above is not a good thing to do.
Analyze the need for life insurance coverage under need-based analysis, and then take the required term insurance on your life.
Read an article about LIC vs. pli—which is best?. Click here to read.
Also, read the article about new Jeevan Anand—Why it is not good to you?. Click here to read.
Read about buying a house with a loan—is it good?
And read about why insurance agents will become poor.
Read about the Lic Bima Jyothi Plan.
And read How to Calculate the Maturity for EPF?
