The Indian Investors fascination with 1 Crore Term Insurance Cover

This is a rookie mistake that even the best investors make. We generally tend to believe that a 1 crore term insurance cover is sufficient.

Though there is a shift in the approach towards term insurance nowadays and people have started purchasing it. However, the dream figure for most of us seems to be stuck at 1 crore.

Let’s see what happens if I take a 1 crore term insurance cover.

Due to some unfortunate circumstances if I die tomorrow, how long do you think my family will be able to survive with 1 crore?

Monthly expenses – Rs. 40,000/- : The coverage amount of 1 crore will be sufficient for the next 21 years.

Monthly expenses – Rs. 50,000/- : The coverage amount of 1 crore will be sufficient for the next 17 years

Monthly expenses – Rs. 60,000/- : The coverage amount of 1 crore will be sufficient for the next 14 years.

In terms of calculations, I have done the most basic math by dividing 1 crore with my annual expenses.

I am presuming that my spouse will just keep this entire amount in FDs (No mutual funds, no stocks, or other forms of investments). This will be a zero per cent return assuming 6% inflation and 6% returns.

Most spouses may not be aware of the kind of investments made by their better half must be doing (leave about mutual funds, stocks or other investments) that is why FD.

This amount of 1 crore is only sufficient for the above-mentioned number of years if we do not consider any existing repayment of loan, goals towards child education and marriage.

In case you have any additional assets, you can also check the additional years your family can survive with those assets by dividing the total asset value by your annual expenses.

If you have more liabilities than assets, the above-mentioned years for survival will reduce further.

With all these permutations and combinations,

Do you still think that 1 crore term insurance cover is enough?