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Having a contingency plan in times of need is an absolute necessity. In your absence, your family should still be able to sustain a financially healthy and secure lifestyle. However, the sudden loss of income resulting from your demise can take a toll on your family’s financial well-being. This is where term plans step in.
With term insurance, you can rest assured as it is a guaranteed and safe investment choice to safeguard your loved ones during tough times. But even after getting a term plan, you must decide the payout option that shall suit the needs of your dependents. So, let’s explore the types of term life insurance payout options available and the perks of opting for the lump-sum mode of payment.
When it comes to receiving the sum assured amount from your insurance plan, there are two types of payout options available:
The lump-sum payout in term insurance is the most popular option that many policyholders opt for. Here, you get the entire sum assured amount at one go to secure the financial requirements of your dependents. In the event of an unfortunate mishap, the beneficiary of the term policy shall receive a lump-sum corpus equal to the coverage amount of the plan.
If you would prefer the death benefit to be paid as a monthly income, then a staggered payout option is for you! This mode of payment is suitable for families that cannot manage a lump-sum corpus.
So, the insurance provider shall payout a portion of the death benefit as a lump-sum corpus and the rest will be paid in monthly instalments over the years to come. Furthermore, you can choose from two more options for staggered payout, fixed and increasing monthly payouts.
For such a mode of payment, the insurer will pay out a percentage of the sum assured as lump-sum and the remaining as a monthly income. Many insurers even pay the entire sum assured and offer additional monthly payouts to the beneficiary depending on the type of term insurance chosen.
Here, the sum assured to be paid as a monthly income keeps increasing annually. Along with the lump-sum corpus, you get an increasing monthly payout. Such an option enables you to beat the rising inflation rate and manage the increasing needs of your family.
Check out the benefits of choosing term life insurance lump-sum payment:
Availing the entire sum at once gives you maximum flexibility. While monthly payouts are mostly rigid, lump-sum payouts offer you the freedom to invest in financial instruments of your choice. Moreover, monthly payouts would restrict your spending mainly to monthly necessities, lump-sum payouts enable you to manage 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, you can stop! Under Section 10(10D) of the Income Tax Act, 1961, a lump-sum payout received under the term 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.
Simply put, a ₹1 crore payout now is worth a whole lot more than a ₹1 crore paid out in monthly instalments. 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.
In case of large expenses such as pending loans, children’s education fees, and others, a monthly payout won’t suffice. To ensure your dependents can meet such financial requirements with the insurance payout, the lump-sum mode is a suitable option. Thus, your family shall be independent to use the term insurance corpus as per their needs.
With this, you are now aware of how lump-sum payout in term insurance offers more perks over monthly payout. By opting for the lump-sum payout, your loved ones can easily invest some amount to earn returns over the long term and also meet their financial needs. But have you safeguarded your dependents with term insurance, yet?
Head over to Finserv MARKETS now and browse through the term insurance plans available on our platform! Avail lucrative rider options, enhanced coverage and hassle-free claims in the time of need!
The best payout option in term insurance depends on your family’s financial requirements. In case your dependents can manage a lump-sum amount to earn returns and secure various expenses, the lump-sum payout is for you. However, if your dependents would prefer to receive the amount as a monthly income, you can opt for a staggered payout option.
Term insurance is a pure risk cover and thus, does not offer any maturity benefits. However, you can avail a survival benefit on outliving the policy period by opting for term plans with return of premium.
Survival benefit is a lump-sum payout that you receive on outliving the term insurance policy tenor. This amount consists of all the premiums you have paid throughout the term of the plan. You can avail the survival benefit by purchasing Return of Premium Term Insurance (TROP).
You can claim the premiums paid towards your term plan under Section 80C of the Income Tax Act, 1961. Moreover, you can also claim the death benefit as tax-free under Section 10(10D) of the Income Tax Act, 1961.
You can use the step-by-step process given below to purchase online term insurance at Finserv MARKETS:
Go to the ‘Term Insurance’ section of Finserv MARKETS
Fill up the application form with the required details
Review the policy details and compare plans
Add any suitable riders
Pay the premium online
You shall receive the term insurance policy document on your registered email ID