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About Term Insurance Payout Options

In today’s day and age, it is often recommended that we not only learn how to save our income in order to ensure we have sufficient funds for the future and for any unexpected incidents or medical emergencies but also learn how to invest our money. Compared to savings, investments of various types not only help aid in having funds saved up for a rainy day, but help multiply our wealth, effectively creating a stream of passive income sources that help you make your money work for you. While some investments have aggressive return goals as investors are willing to take on higher risk as is with equity investments, others offer more conservative returns, though have a substantially lower risk. One such type of investment is a term insurance plan. 

Term insurance plans are a simple form of life insurance that allow you to ensure the future of your family, loved ones and dependents in the event of your death. If you are the sole breadwinner of your family, a term insurance plan will ensure that your loved ones have the funds to ensure a secure future, resulting in them not having to worry about financial hardships.

As part of a term insurance plan, you pay a relatively affordable routine premium in order to avail of certain coverage. In the event of your death, your family can avail of this cover. In this article, let’s take a look at what a term insurance payout is, and investigate in an attempt to understand how term insurance payout works.

Different Types of Term Insurance Payouts

Keeping the various financial needs, instability and risk appetite of individuals, insurance companies have developed a number of term insurance payout options that allow your loved ones to claim the cover in a manner that is best suited for their needs. Let’s have a look at the various term insurance payout options.

  • A Lump Sum payout.

This option is fairly self-explanatory. As part of a lump sum payout option, if your family has to claim the cover amount of your term insurance policy due to unforeseen circumstances, they will receive the entire amount at one go. For instance, if you have a term insurance plan that offers a term insurance payout of 75 lakhs, then upon claiming the insurance, your dependents will receive 75 lakhs in its entirety, all at once. While lump-sum payout options offer the most returns at one point in time, it might not be the best option if your family has a limited amount of financial literacy, as they might not know what best to do with the money.

  • Fixed monthly payouts.

As part of a fixed monthly term insurance payout, individuals will first receive 60% of the coverage as a lump sum payout in the event of their demise. This will ensure that they have a significant amount of funds available at their disposal to cater to all their needs. After this, as the same suggests, a fixed monthly term insurance payout will offer your family a certain amount as a payout every month for a duration that has been previously agreed upon during the time of purchase of the term insurance policy. This option takes a ‘best of both worlds’ approach, as it combines the stability of a staggered payout option (explained further in the article), whilst also providing the benefits of a lump sum payout option to some degree.

  • Staggered payout.

A staggered payout is a good option for those who have limited financial literacy and might not know how to employ or invest a lump sum payout in order to make the best of the money. In this event, a staggered term insurance payout option creates a scenario where your loved ones will receive a steady income from the term insurance policy through monthly payout options. As part of the staggered payout option, your family will receive the entire cover amount in monthly instalments over the duration of 10-15 years, or a term that has been agreed upon at the time of purchase.

  • Increasing monthly payouts.

An increasing monthly term insurance payout is a term insurance payout option that is best suited to take into account the rates of inflation that can diminish the value of your money in the future. For instance, if you are receiving 20,000 rupees per month for the next 10 years as part of your term insurance, then it is likely that the purchasing power of that 20,000 is going to be much lower in year 10 than it was in year 1. In order to account for this, increasing monthly payouts were designed.

An increasing monthly term insurance payout option gradually increases the monthly payout you receive overtime. Meaning, while you might receive 20,000 per month in year 1, this amount increases to 25,000 (for instance) in year 2, and so on and so forth.

How to Buy The Best Term Plan for You?

Life stages

Best Payout Option.

Reasons

Young

Lump-sum payout option

As a youngster, in the case of your death, the financial liability falls on your parents, if you have any. A lump-sum payout, therefore, will help them meet this debt.

Midlife

Staggered payout

Your family is likely to be young at this stage, with children requiring financial support for an extended time period. A staggered payout option will ensure they have adequate funds for a while to come.

Elderly

Fixed monthly payouts

It is likely that your children are financially independent by this time. A fixed monthly payout therefore will offer sustenance to your spouse etc.

Conclusion

A term insurance payout ensures your loved ones do not face financial hurdles in the event of your demise. Based on their requirements, there are a number of payout options you can choose from. The Bajaj MARKETS website has a large array of term insurance plans that you can choose from. Visit the Bajaj MARKETS website to get your term insurance plan today. 

FAQs on Term Insurance Payout Options

  • ✔️Can I surrender my policy during my tenure?

    Yes, but you are likely to make a loss as it is a term insurance plan. 

  • ✔️Can I insure my spouse and children?

    A term insurance plan is built to ensure financial stability of your spouse and children in the event of your demise. 

  • ✔️What are riders in a term insurance plan?

    Riders in a term insurance plan are add-on covers that you can purchase to account for certain specific incidents such as death by accident or critical illness.

  • ✔️How long does it take to avail of the cover?

    Generally, a term insurance payout cover is processed between 8-15 working days. 

  • ✔️Will my premium change during the tenure?

    Once a term insurance plan premium has been set, it remains constant for the duration of the policy. 

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