A term life insurance is a type of life insurance policy where the policy is active for a specified number of years opposed to a full life insurance policy, which is active for the policy holder’s entire life. In the case of a term plan, if the policy holder dies during the policy period, then his or her family is entitled to the death benefit or the sum assured in a lump sum amount. However, this lump sum amount can be quite large, and not everyone has enough financial expertise to use such an amount wisely, which can lead to premature exhaustion of the received funds. In such a scenario, all the hard work and planning done by the policy holder to secure his/her family’s future will be in vain since his/her family will cease to have a regular income. To counter this occurrence, insurance companies started the monthly income scheme term insurance plan, wherein the family gets a regular monthly income in addition to the death benefit.
What is a monthly income term life insurance plan?
A term life insurance with a monthly income plan is like any other term life insurance plan, but instead of providing the bereaved family with a one-time lump sum amount, the insurer pays out part of the death benefit first, and the remaining amount is paid out via monthly instalments.
Benefits of a monthly income term insurance plan
- Part of the death benefit, usually 10%, is paid out at the beginning, to take care of immediate expenses after the loss of the policy holder.
- Remaining amount is paid via monthly payments, thus allowing the family to get the funds gradually and take care of periodic expenses like rent, school fees and bills
- People with no financial expertise may not know how to use a full lump sum amount wisely, especially at a time when the family is mourning the loss of their loved ones.
- A monthly income plan also protects the family from being exploited, which might happen if the large, death benefit sum is paid out as a one-time payment.
Types of monthly income term insurance plans
- The following are some of the available term life insurances with monthly income scheme in banks and insurance companies.
- 10% of the sum assured is paid out as a lump sum amount, and the remaining is paid out in monthly instalments for 15-20 years.
- Alternatively, about 60-70% of the death benefit can be paid as a lump sum amount while the remaining is paid on a monthly basis.
- Policy holders also have the option of dividing the sum assured into two equal halves. 50% paid at first and the remaining 50% paid out monthly.
Insurance companies have many plans available and it is up to the applicant to choose the best term insurance plan according to his or her needs.
Thus, a term life insurance with a monthly income advantage plan is quite convenient when it comes to the prolonged financial security of your loved ones. If one chooses the best term plan then one can be assured that their family will be receiving a steady, regular income even in their absence.