When a person takes out risk insurance online, choosing the insured amount is the most important task. The sum insured is the amount that the beneficiary receives from the insured in the event of the death of the insured during the term of the policy.
According to an experienced financial planner, this insured amount should be around 10 times your annual income or 15 times your annual expenses. People with debt like home loans or educational loans will remember to keep these factors in mind when calculating coverage.
Other policies, which also serve as investment plans, offer policyholders a fixed sum insured. IRDA has established a minimum level of insurance in these policies so that they are not limited to pure investment policies. The minimum coverage depends on the age and height of the insured.
The death benefit or the minimum sum insured for online risk insurance cannot be less than 10 times the annual premium for people under 45 years of age. The minimum sum insured is almost 7 times the annual premium for people over 45 years of age. According to IRDA rules, the death benefit offered to the nominee at any time during the insurance period can be at least 105% of the premiums paid.
For plans with a term of fewer than ten years, the minimum sum insured is five times the annual premium of each individual. Also in this scenario, the death benefit offered to the nominee or the sum insured at any time during the life of the policy must not be less than 105% of the premiums paid.
The insurance regulator is lowering the limit for regular short-term policies as insurance companies in India are struggling to take out short-term risk insurance plans with a guaranteed minimum of ten times the annual premium.
Fixed-term policyholders cannot take advantage of tax benefits if they choose an insured sum that is less than ten times the annual premium. Under Section 80C, the withholding tax benefits have been increased to Rs 1,500 million. Payments owed would be tax-free under § 10 (10D) if the premiums do not exceed 10 percent of this insured sum or if the insured sum is at least ten times the premium.