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Often, you do not like to think about an unfortunate event that may result in your sudden absence. However, life is unpredictable, and an accident or critical illness may have unforeseen outcomes.
If you are the sole or the primary earning member of your family, have you considered how your loved ones will meet their financial expenses in your absence? An excellent and affordable option is to avail of a term insurance plan.
The question in your mind may now be what term insurance plan is. It is a pure life insurance plan that pays the benefits to your nominees if an untoward incident occurs during the policy duration.
About Income Replacement Term Plans
Generally, the insurer pays the term insurance benefits as a lump sum to your nominees in case something tragic happens with you during the policy period. However, you may choose an income replacement term plan.
The biggest term insurance benefit in such a plan is that the insurer provides the total benefits to your nominees in periodic installments for a particular tenure. Your nominees receive the entire sum assured (SA) in pre-determined installments until the complete amount is paid.
Here are the term insurance benefits when you select an income-replacement plan:
#1. Aids in Meeting Regular Expenses
If you are the sole earner in the family or if your children are still young, this kind of term plan will ensure they can meet their day-to-day expenses without facing financial difficulties.
This plan is also beneficial if you have elderly parents who are financially dependent on you.
#2. Assists in Financial Planning
Your family may not be well equipped to handle a large lump sum payout in case of an unfortunate circumstance.
Monthly payouts equip them to manage smaller amounts to meet their current expenses, and they avoid making inaccurate financial or investment-related decisions.
#3. Helps Achieve Monetary Goals
Your sudden absence may make it difficult for your family to meet their financial objectives.
An income-replacement term plan ensures that your dear ones can accomplish various financial aspirations, such as your children’s education or their wedding without any financial distress.
#4. Facilitates Monthly Budgeting
If the term plan pays a lump sum when an unforeseen event occurs, your family may be unable to manage their finances. As a result, they may spend too much or too little.
However, when they receive a fixed payout at timely intervals, they can adhere to a monthly budget, knowing the income and expenditure.
#5. Offers Inflation-Adjusted Regular Income
Some income-replacement term plans ensure that your family receives an increasing payout over a longer period.
This is an ideal alternative because the rising income ensures that they do not have to compromise on their lifestyle due to a lack of liquidity.
Income Replacement Plans – Premium and Documents Required
Income-replacement plans are available at an economical term insurance premium. You may avail of this policy online through a quick and simple procedure.
The documents needed at the time of application include identity proof, age and address proof, and your recent photograph.
Inclusion of Riders in a Term Plan
You may enhance the term insurance coverage through additional riders. These include critical illness and waiver of premium benefits, among others.
However, before including riders, you need to bear in mind that the total term insurance premium will increase when you select these additional benefits.
Combined Payouts
If you do not want to opt for an income-replacement term insurance plan, you may consider combined payouts. If you pick this option, the insurer pays a certain percentage of the total SA as a lump sum when an unfavourable situation occurs.
The insurance provider pays the balance amount in periodic intervals over a certain duration until the total SA gets exhausted. The policy is terminated when your nominees receive the entire SA.
Income Replacement Term Insurance Plan Benefits
Income-replacement plans are a suitable way to ensure the financial well-being of your family for a longer tenure.
However, before choosing this plan, you must consider the requirements of your family members.
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