Term Insurance: Should You opt for Lump-Sum or Monthly Pay-Out?

Life is full of uncertainties, so much so that it is difficult to predict what will happen in the next minute. Life catches up with you so fast that you don’t get time to think about it. The stakes are higher when you are the sole bread earner of the family, and you must protect your loved ones from life’s contingencies when you are not there to support them. Having a life insurance is a must especially if you run a small business.

According to Census 2007-13, during the middle ages of 45-70, 37% of the people in India lose their lives. Cardiovascular disease is the major primary cause of early deaths taking a toll to 23.9% in male and 20% in female.

When such events occur, your family tend to go through the emotional trauma while some might go through financial instability as well. To avoid such cases, it becomes a necessity to opt term insurance for the safety of your family’s future.

If you’re wondering how then let us clear the air for you, term insurance provides all the benefits of your choice at a meagre amount.

Term insurance is a pure form of life insurance, which provides a significantly large cover amount to the family after your demise.

Term plans from reputable insurers such as Max Life Insurance allow you to choose the duration and the benefit amount under the policy, along with the option of receiving the amount, at the time of purchase. While a lumpsum payout is preferred by many policyholders, you may choose a monthly disbursal mode of the insurance benefit. Let us take an overview of the two payout forms – lumpsum and monthly.

What is Lump Sum Payout?

By choosing the lump-sum payout, your nominee will receive the entire sum assured (insurance benefit) at once, after your demise within the policy tenure.

It is only wise to choose the lump-sum payout if only you’re confident that your family will make sensible use of the money. If any of your family members don’t have the financial knowledge, you have the option to opt the plan for monthly payout.

What is Monthly Payout?

Monthly or Staggered payout will provide your family with a fixed monthly income to fulfill their needs while providing the option to choose additional benefits.

Factors to Consider While Choosing the Payout Options

If you’re the only bread-earner of the family, term insurance becomes a must buy as it secures the future of your family.

Choose the plan according to the benefits you would like your family to receive. The sum assured under the term plan should be high enough to cover your family’s lifestyle needs, along with their future goals. Therefore, you need to assess your premium payment capability, existing income, and future financial needs before choosing the sum assured.

For example, if you have hefty loans to repay, it is only wise to opt for a large sum assured that covers your liability and select the lump sum payout. But if you have average to minimum credits to pay, you can choose between different monthly payout options.

Before opting any term plan, read all the terms and conditions; and compare between different online term plans to choose the one that aligns with your needs. The plan should be such that it does not come at the cost of your present to fulfill your future requirements.

Different Payout Options Available Under Term Plans

Here are the payout options available under term insurance plans, when you buy a policy online:

Sum assured in monthly income: The plan will act as an income replacement for your beneficiary/family. Under this plan, the total sum assured is divided equally into a monthly income.

Sum assured with increased monthly income: Apart from providing the monthly income, it also covers the benefits to overcome market inflation. With the general increase in prices, a fixed annual growth is provided by the insurer.

Lumpsum with monthly pay-out: Under this plan, your beneficiary will receive up to 100% of the total sum assured along with an additional monthly income payout. Choose it if you have intermediate loans to repay along with availing a fixed monthly income.

Lumpsum with an increased monthly pay-out: This plan combines the benefits of the methods listed above. Apart from receiving a fixed payout, your beneficiary will receive an increasing monthly income for a specific period.

Term insurance plans act as a safety net for your family in case any unfortunate event or a mishappening occurs. Make sure you choose the plan sensibly while analyzing the benefits. You can also buy the policy online for a smooth and quick process while availing discounts.

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