Term plans are an excellent way of securing your family's financial future, as the payout from such plans can be used by the family members for their expenses even in the absence of the breadwinner. You might have even heard from many insurance sales agents that "₹50 lakh term cover is enough to protect your family." Is this really the case, though?
₹50 lakh sounds like plenty of money to most people. It is a lot of money, after all, and it should be able to meet your lifetime expenses if you invest it properly. The only problem with such a thought process is that we keep living life in the present! prices approximately double every 10 years in India, which means that the value of your money halves every 10 years. Let's go through the things you need to take into account before deciding whether this amount is right for you or not.
What is a ₹50 lakh term plan?
Term plan is a type of pure life insurance where the policyholder only pays a predetermined premium amount at a regular frequency (monthly or yearly) or as a lump sum payment at the inception of the policy term in return for the insurance company's commitment to pay the insured's nominee a specific amount of money called Sum Assured if the insured expires during the policy term.
The insurance money or death benefit is usually tax-free, and the payout of such an amount or coverage amount acts as a financial cushion for surviving family members, which they can use for meeting their financial goals and periodic expenses, repaying debts, and continuing their desired lifestyle even when the main income earner is not around. Since it is pure protection as no surrender or maturity benefits are paid during the policy term or at the end, 50 lakh term coverage is generally very economical and can be easily afforded by a large number of salaried and self-employed individuals without any financial strain on their budget.
Is ₹50 Lakh Enough? Three Big Questions
To know if this plan is right for you, you need to think about three main things.
1. What Is Your Monthly Household Expenditure?
When you consider your household expenses, you need to take into account groceries, electricity, internet, and clothing, among other things. In 2026, the living costs of a family of four residing in a metropolitan area would most likely range from ₹60,000 to ₹1 lakh per month in order to live without any financial stress.
If your family is given ₹50 lakh and their monthly expenses are ₹60,000, then the money would only be sufficient for about 7 or 8 years. Following that, the money will be completely exhausted. If you have small children, then their requirement for support might be 15 or 20 years. Hence, in this situation, ₹50 lakh can be considered a very small amount.
2. Are You Under Any Debt?
Owning a house, a car, or even a personal loan is something that most of us have. So, in case you have a home loan of ₹30 lakh and you possess a ₹50 lakh term insurance policy, your entire payout will be utilized for the repayment of the house.
Hence, your family will only have the amount of 20 lakhs left with them. This small sum might be insufficient to cater to the basic necessities such as food and education for several years.
3. What Will You be Needing in the Years to Come?
There is hardly anyone who will want to go against their children's dreams. In fact, we all want them to be able to get quality education and have a grand wedding ceremony.
- Education: At present, a degree from a reputed college costs around 15 lakh to 25 lakh.
- Inflation: The cost of goods increases year after year. A product that costs ₹10 today could be priced ₹20 in ten years.
In case you want to take care of your family's usual expenses and your child's educational requirements, a plan worth ₹50 lakh might get exhausted very rapidly.
A Simple Rule of Thumb
Financial advisers frequently rely on a very simple guideline to supplement their decision-making. They advise that you should have a term insurance cover of 15 to 20 times your annual salary.
- For example, if you have an annual salary of ₹5 lakh, a sum insured of ₹75 lakh to ₹1 crore should be appropriate.
- On the other hand, if you earn ₹3 lakh a year and do not have very large loans, then 50 lakh term insurance might be a good starting point for you.
Who is This Plan Best For?
Though it might not be sufficient for some, for others a ₹50 lakh term plan is just right:
- Young Professionals: If you are at your career phase and don't have a spouse or kids yet, this is an affordable way to start.
- People with Small Families: If you reside in smaller towns where life is cheaper and you have no large debts.
- As an Extra Layer: In case you have a small insurance cover from your office, you can buy this as additional, and you safeguard your family better.
The Cost of Waiting
So what is the reason to buy your term insurance plan now? Because the younger you are, the cheaper it is. When you purchase a plan at the age of 25, the monthly premium will be very small. If you decide to wait until you are 40, the cost will be significantly higher.
Generally, after you purchase the plan, the premium remains unchanged for your entire life. It's similar to locking in a low price forever.
Conclusion: Getting It Right
Really, getting some form of insurance coverage is way better than not having any at all. Buying a term insurance plan of 50 lakh is definitely a good protective measure for one's family, quite economical, and easy to get hold of; besides, it also changes one emotionally by providing a sense of security.
However, before you decide to go for it, just take a moment to pull out a piece of paper and jot down monthly expenses, loans, and the cost of children's education and future. If this figure is significantly higher than ₹50 lakh, then you can opt for higher cover, say ₹1 crore. Your family depends on you now. Term insurance plan will turn their dependency on your love and support even after your demise.
