Nowadays, most people think that a term insurance plan of ₹1 crore will be sufficient for their family. But the real question is, will this amount hold the same value 20-25 years from now? Because of inflation, lifestyle, and the growing needs of the family, the value of this amount. This means that what seems like a "large amount" today may prove to be small in the future.

For example, if your annual income today is ₹15 lakh and you have a cover of ₹1 crore, then that is approximately 6.6 times your current income. However, financial experts believe that life cover should be at least 10-15 times your annual income.

Why does the value of ₹1 crore decrease over time?

Let's understand with a simple calculation how much ₹1 crore will be worth 25 years from now.

Year Inflation Rate Value of ₹1 Crore
2025 - ₹1,00,00,000
2035 6% ₹55,80,000
2045 6% ₹31,00,000
2050 6% ₹23,70,000

This means that after 25 years, the value of ₹1 Crore will be around ₹24 lakh. This means that this amount will probably cover only basic expenses.

How to determine how much coverage is enough for you?
To determine the right amount for term insurance, keep these three basic things in mind:

Your Annual Income: The total cover should be 10-15 times your income. For example, if your income is ₹15 lakh, the cover should be between ₹1.5 crore and ₹2.25 crore.

Your Liabilities: Add up your home loan, car loan, or education loan. If you have a home loan of ₹40 lakh, include that in the cover amount.

Family Needs: Children's education, marriage, medical expenses, and retirement—add these.

Formula: Total Term Insurance = (Income × 15) + Remaining Loans + Future Needs

The cover should increase as your responsibilities increase.
If you're single now, ₹1 crore is fine. However, after marriage, with the arrival of children, and increased expenses, this amount may fall short. What seems appropriate for your current life stage may be insufficient after 10 years. Therefore, review your term insurance every 5 years.

Plans with 'Life Stage Benefit' are beneficial.
Many new term plans today offer a Life Stage Benefit or Step-Up Option. This means that as your responsibilities grow, you can increase the coverage within the same policy without purchasing a new one.

You can increase the coverage upon marriage.

You can increase the coverage again upon the birth of a child.

The limit can be further increased as new responsibilities arise.

If you don't have this feature, you can later obtain "gap cover" by purchasing a new policy.

Example:
Suppose your income is ₹15 lakh and you have purchased a term plan for ₹1 crore. Now, suppose your income increases to ₹25 lakh in the next 10 years. Financial rules dictate that you now need 10–15 times the coverage, i.e., from ₹2.5 to ₹3.75 crore. This means your needs have more than doubled.

Opting for a term plan for ₹1 crore at age 35 is a good start. However, as your income and responsibilities increase, it's important to review this coverage. If your policy doesn't offer the option to expand coverage, you should consider a new term plan. A "one-size-fits-all" approach doesn't work for everyone. Therefore, it's important to review your policy every five years.

Easy Ways to Increase Term Insurance
Find out about the "Life Stage Option" in your existing policy.

If this feature isn't available, consider purchasing a supplementary term plan.

Review your expenses, loans, and savings annually.

Continuously increase your coverage by 10-20% each time your income increases.

Is it right to have two-term insurance policies?
Many people think it's wrong to have two policies, but that's not true. You can have two or three policies to meet different needs at different times. This increases flexibility and maintains tax benefits. The claims process is also easier if all documents are clear.

Conclusion: 1 crore is a start, not a destination.
If you buy ₹1 crore term insurance at the age of 25-30, it's not wrong. But don't consider it final. Review it every five years based on your income, expenses, debts, and family size. Remember, insurance isn't just about money; it's about guaranteeing your family's financial security.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.