Having a contingency plan in times of need is an absolute necessity. In the event of your death, your family should still be able to sustain a financially healthy and secure lifestyle. The sudden loss of income resulting from your demise might take a toll on your family’s financial well being. This is where term insurance steps in. Term insurance is a guaranteed and safe investment to get an additional source of income during tough times.
What are the payout options available in a term insurance plan?
While there are options like a monthly payout scheme, a part lump sum-part monthly income scheme, the most popular payout option in term plans is the total lump sum payout. This is how a lump sum payout works:
The policyholder pays the predetermined premium amount throughout the policy tenure. In the event of the policyholder’s unfortunate demise, the entirety of the Sum Assured, i.e. the payout, is given to the policyholder. For instance, if Mr. Khan has decided to opt for a term plan with a Sum Assured of Rs. 1 crore and in case he passes away during the policy term, his family will be able to avail the total Rs. 1 crore all at once.
What are the benefits of a lump sum payout?
Flexibility: Availing the entire sum at once gives you maximum flexibility. While monthly payouts are mostly rigid, lump sum payouts give you the freedom to invest in whatever you please, whenever you please. While monthly payouts would restrict your spending mainly to monthly necessities, with lump sum payouts, you can budget for your monthly expenses as well as meet your investment needs. Thus, lump sum payments give you optimum control over your money.
If you’re worried about the tax implications, worry not! Under Section 10(10D) of the Income Tax Act, a lump sum payout received under a life insurance policy is tax-exempt. The only condition to this is that the premiums paid in a year should not be more than 10% of your Sum Assured.
Return on Investments: Simply put, a 1 crore payout now is worth a whole lot more than a 1 crore paid out in monthly installments. A larger sum assured means you have at your disposal a larger principle investment amount all at once, which would guarantee that you avail higher returns. This is because you have the freedom to invest the entire sum as you please and watch the power of compounding work its magic over time. Investments made for the long-term result in higher returns over that period of time. And if you have access to a larger Sum Assured and are able to invest the same in good market instruments for the long term, you can avail a considerable amount of returns on your investment.
Inheritance: If the beneficiaries of the plan want to ensure that the payout money is passed down to their dependents (i.e. sons, daughters or wards), taking a lump sum amount is ideal. This is largely because, upon death of the beneficiaries, it isn’t always guaranteed that monthly installments would continue to their dependents or family members. Hence, with a lump sum amount, the beneficiaries have more control over the money and can ensure that the payout money is passed down to their own family members.
If you are considering buying a term insurance policy, you can avail Bajaj Allianz Term Plan on Finserv MARKETS and enjoy a bunch of other benefits. You can get an INR 1 crore coverage at affordable premiums. It also comes with an additional child education cover which provides additional protection of up to 10-100% of the base cover towards the child’s educational goals. It also comes with a critical illness rider, which provides enhanced coverage for up to 55 critical illnesses. Also offered are accidental death and accidental total permanent disability benefits along with joint life and increasing life coverage plan variants. In addition to the above benefits, you can also avail a number of tax benefits on purchase of this term insurance plan. Under Section 80C, you can avail tax deductions on the premium paid for your term insurance policy, while under Section 80D, if you have opted for the critical illness rider, you can avail tax deductions on the premiums paid. You can rest assured that your family is safe and secure, even in your absence.
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