Every family has a head member to look after the financial responsibilities of the entire family. As the breadwinner of the family, you might work hard every single day to earn more income to safeguard your family’s needs. During your active working years, you might sacrifice your dreams and look after the financial well-being of your family to ensure they are safe.
While you are alive, you might ensure the members of your family lives a stable life without worrying about financial constraints. However, who would bear the financial responsibility of your loved ones in your absence? Although there are innumerable life insurance products for your family, a term life insurance offers the much-needed financial protection after your demise.
Before you buy term insurance for your family members, let’s try to understand the detailed meaning of term insurance:
Term insurance is a pure protection plan, which can cover your family from the eventualities of life. Since your loss can be unbearable for your family, term insurance would provide a death benefit after your demise. The death benefit is usually offered to the nominees of your policy to maintain their current lifestyle in your absence.
As the nominees, your family can decide whether they wish to obtain a monthly income or a lump-sum amount after your death. Although the decision lies in your family’s hand, they might tend to make the wrong choice, which can eventually leave them inadequately insured. Due to the limited knowledge of term insurance policies, your families might choose to opt for a lump-sum amount.
When it comes to the selection of payouts, your loved ones should select the monthly income. On selecting the monthly payout, your family would be receiving a monthly amount to meet their routine and household needs. As the beneficiaries of the term insurance policy, your family can receive a monthly payout until the tenure (15-20 years).
Under monthly payout, you can select the following options:
- Lump-sum with an increasing monthly income
Your family members would receive a monthly payout, which can be bound to increase at an annual rate between 10%-20% every year.
- An equal proportion of lump-sum and monthly income
Your family can receive an equal amount of your lump-sum amount and monthly income.
- High lump-sum and low monthly income
While you can obtain a major chunk of the sum assured amount, you can receive the rest of the money in instalments every year.
Term life insurance, which offers a monthly payout, can be beneficial to you if you belong to the following categories mentioned below:
- Families with low financial literacy
- Families unable to manage the lump-sum amount
- Families unaware of how to invest money
- Families with a single income
Before selecting the monthly payout option, your loved ones should understand how to calculate the monthly income. Therefore, let’s understand how your family can calculate the income every month:
- List down your routine expenses. It can contain the rent payments, EMIs, car loan repayments, and so on.
- Add all the expenses to determine the monthly payout.
- Consider the inflation rate.
As highlighted above, term insurance with monthly payouts can reduce the financial burden of your family in your absence. Rather than burdening your loved ones with a lump-sum amount, which they might be unable to manage, choose monthly payouts to ensure their maximum convenience. A monthly payout can allow your family to meet their monetary expenses with the flow of income every month.
