Why Does It Make Perfect Sense to Choose the Higher Sum Assured Amount?

Purchasing a life insurance policy has become more convenient in recent years, with many people opting to buy their plans online due to ease and speed. However, despite the simplified process, it’s essential to avoid common mistakes when selecting a term insurance plan. One such frequent error is choosing an inadequate sum assured. A common question arises: Should you opt for a ₹50 lakh plan or a ₹1 crore term insurance policy? There’s no universal answer—but by the end of this article, you’ll understand why choosing a higher sum assured often makes more sense.

Why the Sum Assured Matters in Term Insurance

The sum assured is the amount paid out to the nominee in the unfortunate event of the policyholder’s death during the policy tenure. It serves as the financial safety net for your family, ensuring their stability even in your absence.

Many individuals settle for a sum assured of less than ₹50 lakh, often assuming that higher coverage equals unaffordable premiums. While it’s true that premiums increase with coverage, this should not deter you from opting for adequate protection. Below are key reasons to consider a higher sum assured—particularly a ₹1 crore term insurance policy.

1. Inflation: Rising Costs Over Time

Inflation significantly reduces the value of money over time. Over the past decade, prices of essentials like food, education, healthcare, and transportation have risen sharply. While ₹50 lakh may seem sufficient today, it might not cover your family’s future needs. A ₹1 crore term plan offers better protection against rising living costs, ensuring your loved ones maintain their standard of living.

2. Loan Coverage: Protect Your Family from Debt

Many people calculate their term insurance based on daily expenses and education costs but overlook outstanding debts. If you have a home loan, car loan, or personal loan, your sum assured should be enough to cover these liabilities. This ensures your family isn’t burdened with repayments after your absence.

3. Discounted Premiums for Higher Coverage

Contrary to popular belief, opting for a ₹1 crore sum assured doesn’t always mean a high premium. Insurers often offer discounted rates for higher coverage, making a ₹1 crore term insurance plan surprisingly affordable—especially when purchased early in life. In fact, providers like HDFC Life Term Insurance Plans offer a variety of flexible and cost-effective options tailored to different financial needs and life stages.

4. Comprehensive Financial Protection

Choosing a lower sum assured could leave your family financially vulnerable. A higher sum assured covers essential life events such as:

• Your child’s higher education or marriage

• Your spouse’s retirement fund

• Aging parents’ medical care

• Unforeseen medical emergencies or lifestyle changes

A ₹1 crore term insurance plan ensures your family receives a substantial payout to maintain financial stability through difficult times.

How Much Sum Assured Do You Actually Need?

While a general rule suggests your sum assured should be 15 to 25 times your annual income, a more accurate figure depends on your personal financial situation. Here’s how to estimate the right amount:

1. Calculate your monthly expenses and multiply by 15, 20, or 25.

2. Estimate future goals like children’s education, weddings, or retirement savings.

3. Add outstanding liabilities, such as home or personal loans.

4. Subtract current assets and investments like savings, rental income, or mutual funds.

The final figure will give you a clearer picture of the sum assured you actually need to safeguard your family’s future.

Questions to Ask Before Choosing Your Sum Assured

Choosing the right term insurance coverage requires thoughtful consideration. Ask yourself:

• What is my current income? Aim for 10–15 times your annual salary.

• What debts do I have? Include all loans that could burden your family.

• What are my dependents’ monthly expenses? Cover household, medical, and lifestyle needs.

• What are my family’s future financial goals? Consider inflation in long-term goals.

• Do I have savings or other income sources? This can offset the required sum assured.

• Do I have dependents with special needs? If yes, plan for lifelong care.

Final Thoughts

The peace of mind that comes with knowing your family will be financially secure—even in your absence—is invaluable. However, buying a term plan with inadequate coverage can leave them underinsured and vulnerable. By assessing your needs thoroughly and understanding the long-term benefits of a higher sum assured, such as a ₹1 crore term insurance policy, you can make a confident, informed decision.

Don’t just buy life insurance—buy the right coverage. Choose a policy that truly protects your family’s future. To explore your options, check out the various HDFC Life Term Insurance Plans available to help you make the right choice.