5 Reasons to Choose the Regular Payout Option in Term Insurance

November 25, 2020
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Donny Raw
Posted in Business
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Life insurance is one of the best investment instruments to safeguard the monetary future of your loved ones in case of your unfortunate absence. The death benefit that your nominee will receive is a replacement of income that helpsyour family members to meet the day-to-day expenses and achieve their long-term financial objectives.

Various types of life insurance plans are available in the market. However, if you are purely looking for life coverage, a term insurance plan can be the best option for you. If you wish to know more about what is a term insurance plan, read on.

Term insurance is a pure life insurance plan that insures the policyholder’s life by offering him or her a highsum assured at an economical premium. Term insurance provides a couple of payout options, like one-time lump sum payment and regular payout payment.

Here are the top five reasons why you should choose the regular payout alternative in term insurance.

Difficult to manage a vast corpus for a longterm

As mentioned above, while buying term insurance in India, the insurer gives you the option to choose between a lump-sum payment or paymentsat regular intervals. The question here is, will your nominee be able to handle such a large amount. For instance, if your family members are used to managing around INR 50,000 to INR 60,000 per month, it will be overwhelming for them if they receive a death benefit of INR 1 crore at once. They will be expected to live with this sum for a duration of 30 to 50 years. Here, there are higher chances of your family overspending the amount. So,it may be difficult for them to achieve all their long-term financial goals. In the case of a regular payout option, your dear ones can plan the expenses wisely.

A safer alternative compared to other plans

Your nominee policy can invest the large corpus in a safe annuity insurance plan offered by life insurance companies to generate regular income. However, doing this has some challenges, which include:

It is not simple to search for the right annuity plan; the procedure will take time
It comes with a compulsory life cover, which makes it expensive

Thus, the regular income plan is a much better choice.

Restriction to switch to regular income

When you buy term insurance in India,be cautious while selecting between a lump sum one-time payment or a regular payout option. If you have opted for a one-time lump sum payment alternative, you will not be able to shift it to a regular income option later during the plan’s tenure. Here, you can even pick a combination of both payout options. You can divide the total sumassured into two parts, wherein one portion can be for the regular income, and the other section can be for the one-time lump sum payment.

Possibility to regulate the income for inflation

In a regular payout option plan, you have the opportunity of managing your regular income plan according to the rise in inflation. Many insurers allow you to increase the regular payout option by 5 to 10 percent, making it easy for your family to meet the financial expenses efficiently.

Suitable for those with fixed household expense

A regular payout plan can be the best bet if you have to take care of the household expenditure, which includes children’s expenses. Such a plan will be simpler for your loved ones to control the finances in a smarter manner.

Now, when you know what is a term insurance plan and how your family can benefit from the regular payout option, it is time to select the appropriate term policy to ensure your family’s financial safety.