A term life insurance policy is a form of life insurance policy that is valid for a set number of years, as opposed to a complete life insurance policy, which is valid for the policy holder’s whole life. If the policyholder dies within the policy period, his or her family is entitled to the death benefit or the sum promised in a lump sum amount under a term plan. However, this lump sum amount can be fairly significant, and not everyone has the financial expertise to manage such a huge quantity responsibly, which might lead to early exhaustion of the cash received. In this case, all of the policyholder’s hard work and planning to guarantee his/her family’s future will be for naught because his/her family will no longer have a regular income. To address this issue, insurance firms introduced the monthly income scheme term insurance plan, which provides the family with a regular monthly income in addition to the death payment.
What is a term life insurance plan with a monthly income?
A term life insurance with a monthly income plan is similar to any other term life insurance plan, except that instead of paying out a lump sum to the bereaved family, the insurer pays out a portion of the death benefit upfront, and the remainder is paid out in monthly instalments.
The advantages of a monthly income term insurance policy
A portion of the death benefit, often 10%, is paid out at the start to cover immediate expenses upon the death of the policy bearer.
The remaining amount is paid in monthly installments, allowing the family to receive income gradually and cover periodic expenses such as rent, school fees, and bills.
People without financial competence may not know how to use a large lump sum money responsibly, especially if the family is grieving the loss of a loved one.
A monthly income plan also prevents the family from being exploited, which could occur if the high death benefit sum is given out in one lump sum.
Plan types for monthly income term insurance
The following are some of the term life insurances with monthly income schemes that are offered in banks and insurance firms.
10% of the cash insured is paid out as a lump payment, with the remainder paid out in monthly installments over a period of 15-20 years.
Alternatively, around 60-70% of the death benefit can be paid as a lump payment, with the remainder paid monthly.
Policyholders can also choose to divide the sum insured into two equal halves. 50% is paid up front, with the remaining 50% paid out monthly.
Insurance firms provide numerous plans, and it is up to the applicant to select the best term insurance plan based on his or her needs.
Thus, when it comes to the long-term financial security of your loved ones, term life insurance with a monthly income advantage plan is extremely convenient. If the best term plan is chosen, one may be confident that their family will receive a consistent, regular income even if they are not present.
