5-reasons-you-should-choose-regular-income-pay-out-option

5 Reasons to Choose the Regular Income Payout Option

Give your loved ones more than a lump sum. Secure steady support when they’ll need it most with a regular income payout.

Written by : Knowledge Centre Team

2025-08-02

888 Views

8 minutes read

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A life insurance policy is a powerful tool to ensure financial safety for your family. But, like any other tool, you need to know how to use it for maximum efficiency. When chosen wisely and aligned with your financial goals, it can offer peace of mind and lasting stability. However, if used without proper planning, even the most well-intentioned policy can become a source of confusion or stress, defeating its very purpose. That’s why understanding key features like the regular income payout option becomes crucial in making the most of your life cover.

Key Takeaways

  • Managing a large lump sum can be challenging. Regular income makes long-term financial planning easier for families.

  • Regular payouts ease stress by covering essential expenses when families need support the most.

  • The regular income option must be chosen at policy purchase. It cannot be added later.

  • You can opt for income that grows yearly (5% or 10%) to protect your family against inflation.

  • Regular income starts automatically after claim settlement. No extra steps needed from the nominee.

Why Do Pay-out Options Matter in Life Insurance?

While most people focus on the premium and coverage amount of their life insurance plan, very few pay attention to how the benefit will be received. Will your family get the entire sum in one go, or would they be better off receiving it as a steady monthly income?

The structure of your plan’s payout can directly affect how smoothly your family navigates their financial needs during tough times. This is why term plans by Canara HSBC Life Insurance now offer a regular income pay-out option to help address real-life challenges more practically.

Here are a few reasons why the right payout structure matters:

  • Helps avoid poor financial decisions: A lump sum can be overwhelming and easy to mismanage.

  • Keeps household budgets running: Regular inflow is better suited for monthly expenses like rent, utilities, or school fees.

  • Reduces stress during emotional times: Your family won’t have to worry about financial planning right after a crisis.

  • No extra effort required from family: Income begins automatically with claim approval, no need to buy annuities later.

  • Can be tailored to your needs: Options like fixed or growing income make it easy to plan ahead.

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Regular Income Pay-out: 5 Practical Benefits You Should Know

Nowadays, the best term insurance plans have a regular income payout feature. Here are five reasons this is an essential choice for you:

Managing a Large Corpus for A Long Time Is Difficult

The best life insurance plans give you the option to choose how they will pay the claim amount to your family. Traditionally, the nominee receives the entire sum assured as a lump sum. But is receiving a large payout all at once really the most practical option?

Imagine, a person who is used to handling about ₹40,000 – ₹50,000 in a month, receives ₹1 crore in the account and is expected to live on this money for the next 30 to 50 years. How comfortable do you feel your family would be managing a sum this large and trying to achieve all their goals and needs?

What are the chances that the family will use the money efficiently without under- or overspending?

What are the chances they will be able to invest this money and generate a regular income stream?

As complicated as these questions are, the answers are no less troublesome. To address these concerns, Canara HSBC Life Insurance now offer regular income payout options in their term plans. This allows your family to receive the sum assured in the form of monthly income, be fixed or increasing, helping them manage day-to-day expenses more effectively, just like a steady salary.Insurance is the Safest Mode of Investment

One of the solutions for generating safe and regular income from a large corpus is an annuity plan from life insurers. But there are a couple of challenges with this approach:

  • Limit for a minimum entry age

  • Search and purchase of an annuity takes time

  • More expensive as it comes with mandatory life cover

So, if you could invest the lump sum with a life insurance company, you would still want to avoid these challenges. Therefore, the inbuilt regular income feature in the term plan is a far better option.

It takes away all the effort from your family and nominees in this direction, and the income starts right with the claim settlement.

You Cannot Switch to Regular Income Payment Later

Also, remember that you cannot switch to a regular income option later during the coverage. This is one option that reflects in your regular premium payments; thus, you need to carefully select the feature at the time of purchase.

However, remember that the family will still need the lump sum money to take care of their life goals. While they use the regular income towards their daily needs, they can add the money from the pool to the goal-based long-term investments.

So, you will need to divide the total sum assured between a sum which will generate the income and another which will go out lump sum.

What About the Income Needs of the Family?

One of the major concerns Vaibhav raised was about his family trying to build an income stream from the life insurance corpus. Term plans like Canara HSBC Life’s iSelect Smart360 Term Plan have a ready solution for this problem.

While a lump-sum Payout is the default option available in all term plans, iSelect Smart360 Term Plan allows you to divide the lump sum benefit into (a) Corpus for regular income payment and (b) Corpus for Lump sum payment.

You can Adjust the Income for Inflation

Regular income feature in a term life insurance plan also allows you to provide inflation-adjusted income to your family. You can select the annual rate of growth for the income payout. 

How Does Growing Income Pay-out Work?

If you had selected 50% of your total sum assured (₹ 1 crore) for regular income and want the income to grow at 5% every year, your family’s income in the first year would be about ₹ 41,700.

This is the sum your family will keep receiving for the next 12 months, and then this amount will increase by ₹2085 (5% of 41,700) in the next year, and so on. Remember that ₹2085 will be the only increment, as the growth rate is simple.

This is a better option from a behavioural perspective, as your family will have some reprieve from inflation in the way of increasing monthly income, whereas a fixed sum may cause their lifestyle to decline over a long period due to inflation.

Convenient for Family Members with Regular Household Expenses

Regular monthly income is more useful when you have children’s expenses and regular household budgets to maintain. Unlike the larger life goals, kitchen and lifestyle expenses cannot be clubbed, migrated, or postponed. The expenses must happen, and thus, the regular income is an important factor for peace of mind.

An automated regular income payout from the term insurance policy does not need any effort from your nominees except for the claim application. Therefore, it is the most convenient option for them if you choose at the time of purchase.

It is Handy at Other Times As Well

It’s not only the death claim where regular income payout works so well. Even in claims of disability or critical illness, where there are high chances for you to lose your income, the regular income feature is a breeze of fresh air.

Just a few things you should be careful with if you want to use this feature for the convenience of your family:

  • Choose the option at the time of buying.

  • Estimate the income amount and divide the corpus accordingly

  • Over a long period, a growing income option is better than a fixed income

  • Take special care with the tenure of income payment

Canara HSBC Life Insurance allows your family to receive a regular income payout for up to 40 years.

types of regualar income payouts

Conclusion

Choosing the right life insurance payout option is not just a matter of preference. It’s a crucial decision that can shape your family’s financial future. A regular income payout ensures that your loved ones have a steady stream of money to manage day-to-day expenses, without the burden of complex financial planning during difficult times. It brings structure, predictability, and peace of mind when it's needed most.

So, while the lump sum may look attractive at first glance, a well-planned regular income payout could prove far more valuable in the long run.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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