₹20 Lakh Term Insurance

Here is how buying a ₹ 20 Lakh term policy helps you to look after your family’s finances.

What is a ₹20 Lakh Term Insurance Policy?

A ₹20 Lakh term insurance policy is a term insurance plan that offers a sum assured of ₹20 Lakh to the nominee. If the policyholder passes away during the policy term, the insurer will have to pay the amount of ₹20 lakh as the death benefit to the nominee. To make sure that the nominee receives the claim, a policyholder is required to pay their premiums regularly.

Why Should You Buy a ₹ 20 Lakh Term Plan?

• Affordable Premiums: The ₹ 20 lakh term insurance plan provides the dual benefit of protection and affordability

• Financial Protection: It gives financial protection to the family of the life assured in case of death. This term plan provides you with the money that you can use to meet your day to day expenses.

• The right fit for your income: Most people choose cover worth about 10 times their yearly income. So a ₹20 lakh plan may suit someone earning around ₹2 lakh a year, or about ₹16,500 a month.

• Easy to work out with HLV: If you're unsure, your Human Life Value (HLV) can help. It looks at your future income, expenses, investments and loans to show how much cover you really need.

• Quick estimate with a calculator: A term insurance calculator shows in a few minutes whether ₹20 lakh is enough for you, and what it will cost.\

• Help with loans and rising prices: Your cover should be enough to help your family pay off debts and keep up with inflation. If ₹20 lakh falls short, you can increase your cover or buy a second plan later.

How a ₹20 Lakh Term Insurance Plan Works?

A ₹20 lakh term insurance policy will give your family a death benefit of ₹20 lakh. This death benefit is paid to the nominee after the death of the policyholder during the policy term. In exchange for this coverage, the policyholder must pay regular premiums. If you outlive the policy term, the insurance policy will end.

Here's a quick example.

Let’s understand the working of a ₹20 Lakh term insurance with a quick example

Meera is 30, works in Pune and pays ₹14,000 a month in rent. She chooses a ₹20 lakh life insurance cover for 30 years, till she is 60.

Meera dies in a car accident after 12 years, while the policy is still in effect. If the claim is valid under the policy terms, the nominee receives the applicable death benefit of ₹20 lakh.

After that the family can use the amount in accordance with its financial requirements such as to meet the regular expenses of the household, to pay off the outstanding loan or to meet other immediate needs.

Why is Sum Assured an Important Factor When it Comes to Buying Term Insurance?

If you wish to secure the financial future of your family after you are gone, it is important that you take the right step today. Consider each and every factor before buying a term insurance plan, because choosing an ideal term insurance cover is the first step you can take to secure the tomorrow of your family

Not sure how much you need? Use the tabs below to look at different cover amounts and find one that fits.

Who Should Buy a ₹ 20 Lakh Term Insurance Plan?

A ₹20 lakh term plan is best suited to people whose income, liabilities and number of dependents are relatively modest. You can consider buying the best term insurance plan with a ₹ 20 Lakh cover if you are:

Young Professionals and Primary Earners

Early-career earners who support parents or siblings can use a ₹20 lakh plan as their first life cover. Premiums are lowest when the policy is bought young, and the rate stays fixed for the full term. A 25-year-old who starts with ₹20 lakh can buy a second policy at 30 or 35, once a salary hike, marriage or a child raises the family's needs.

Married Individuals with Dependents

Consider a couple with one child and household spending of ₹30,000 a month. A ₹20 lakh payout would meet those costs for about five and a half years That gives the surviving spouse time to plan better for future finances. It does not replace the lost income over the long term, but buys time for your family to stabilise their life for a few years

Individuals with Existing Loans

A ₹20 lakh cover may be sufficient for smaller liabilities such as a personal loan, a vehicle loan, or an education loan. Most home loans exceed this amount, so borrowers should consider their outstanding loan balance when deciding on the sum assured for their second term insurance.

Self-Employed Professionals and Business Owners

Self-employed individuals do not receive employer-provided group life cover, so a personal term plan is often their only protection. A ₹20 lakh plan suits those with moderate earnings and limited business debt.

Individual Looking for Affordable Coverage

These plans offer 20 lakh life insurance premiums that are lower than higher-cover plans, making it accessible to buyers on a tight budget.

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Common Mistakes to Avoid with a ₹20 Lakh Term Plan

A ₹20 lakh cover serves some buyers well, but it is often too low for higher earners or people with several dependents. These are the mistakes buyers make most often.

Choosing a Cover Based Only on the Premium

A low premium makes a ₹20 lakh plan attractive, but the premium should not be what decides the sum assured.

For someone earning ₹10 lakh a year, a ₹20 lakh cover equals just two years of income. If that person also has a home loan and school-going children, the payout would fall well short.

Financial planners commonly suggest a cover of 10 to 15 times annual income as a starting point. The final figure should also reflect existing loans, savings, the number of dependants and future goals. A term insurance calculator can help you factor in all of these and arrive at a realistic sum assured in a few minutes.

Ignoring Inflation

Money loses value over time. At 6% average inflation, ₹20 lakh received 20 years from now would buy roughly what ₹6.2 lakh buys today.

This matters most for long policy terms. A cover that looks adequate today may provide far less support two decades later.

Selecting a Short Policy Term

A shorter term lowers the premium, but it can leave you without cover when you still have responsibilities. Buying a fresh policy in your late 40s or 50s is costlier, and a health condition diagnosed in the meantime can make it harder to get.

Choose a term that runs at least as long as your family will depend on your income, taking into account the age of your children and the tenure of any long-term loans.

Choosing Return of Premium Without Comparing Costs

Return of Premium (TROP) plans refund the premiums paid if the policyholder survives the term. The premium for this option is considerably higher than for a pure term plan with the same cover.

If you are considering buying Term Insurance with Return of Premium, compare the premium with a regular term plan first. In many cases, the extra amount could buy a larger pure cover instead.

Withholding Health or Lifestyle Details

Insurers rely on the proposal form when approving the policy and again when assessing a claim.

Disclose smoking or tobacco use, alcohol consumption, existing medical conditions and past treatment accurately.

Skipping Relevant Riders

A basic term plan covers death only. Riders can extend protection to other risks.

A critical illness rider pays a lump sum on diagnosis of a covered illness. An accidental death rider pays an additional amount if death results from an accident. Before adding any rider, check what it covers, its exclusions and the extra premium.

What is the Eligibility Criteria for a ₹20 Lakh Term Insurance Plan?

Below mentioned is the eligibility criteria required for a 20 lakh term insurance policy:

The eligibility criteria will vary from insurer to insurer.

Is Buying A 20 Lakh Term Insurance Policy A Smart Decision?

Buying a term insurance policy of ₹ 20 lakh can be a smart decision if you are looking to protect the future of your family on a low budget. You can also buy a term insurance with a 20 Lakh sum assured if you have a low income or no big responsibilities. But in the long run, when you get married, or have children, or decide to buy a house by taking a home loan, a 20 lakh insurance might not be sufficient for you. Therefore, you can start your term insurance journey with a 20 Lakh term plan, and with time, upgrade the coverage as per your family’s needs.

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