As the primary caretaker of the family’s income, you also bear the responsibility of ensuring the continuity of this income to your family. Expecting your dependents to take up the reins of your financial acumen right after your sudden demise could be unrealistic.
Even with a good passive income, your dependents will need time and support to come to terms with the new reality. The usual misfortune families suffer after the sudden demise of the breadwinner is the enormity of long-term financial decisions. Suddenly, they come to face the responsibilities you had so efficiently carried. Term insurance plans generally offer the flexibility to choose the way you want the benefits to be paid out. One such option is monthly income or part lump-sum part monthly income payout of benefits. Choosing a regular payout option will create a monthly income stream for your family.
As a wise caretaker, you would want your family’s regular income to be a safe stream. So how do you ensure that the monthly income stream keeps on trickling?
How Regular Payout Option in a Term Plan will Benefit you?
You could do away with your family’s financial security after your death, by simply offering a huge sum of money using a large term insurance cover. However, your family will have numerous big decisions to make, and you might as well be leaving them without answers:
- Pay-off ongoing debts
- Save for children’s long-term life goals
- Use the money to meet their regular living costs
The third part is incredibly difficult as it’s not a one-time decision. You have a huge sum of money at your disposal and your needs are continuous. Use too little out of the pool and your present lifestyle will suffer, use too much of it and you run the risk of financial distress in the later years.
But, if you can fix the regular income for your family beforehand with the same term insurance plan, you would make their life much less miserable after you.
Thus, regular income is an important factor in a family’s survival. Even when you have huge wealth your family can use, you would want a regular income for the family’s daily needs. Without a regular income, it’s not only difficult to set up a monthly budget, but your needs are likely to drain your wealth sooner than later.
Having a large sum of money seems to make life a lot easier, even if only on paper. However, for most of us, regular income is a result of employment or business activity, and a large pool of funds is a result of good income for a long time.
The profession, employment or business is often the primary forte of one family member, also considered the primary breadwinner for the family. So, if, you are this primary breadwinner for your family, how do you ensure that the family has a source of income even when you are not there?
Buy a Term Life Insurance to Protect your Loved Ones
One of the ways is to buying a term insurance cover for the family. In case of your untimely death, your family can receive a large sum of money. They can use this money to generate a monthly income as well as to meet their future financial goals.
However, the two challenges of investing the money in a safe instrument and tax will remain. Also, your dependents must be prudent about dividing the large sum for income and future goals.
Buying Term Life Insurance with Regular Income Option
Term insurance with a regular income option means you can decide to pay the benefit amount to your family as a monthly income. This is opposed to the usual lump sum only pay-out from term insurance policies.
With this option, your family can receive two different pools of money:
- Lump-sum amount to help pay off any debts and invest in the big future goals
- Another part is converted to a monthly income for the remaining policy tenure
With this option, you can completely eliminate the need for your dependents to invest the insurance proceeds for household needs. Instead, they can focus on their future and living debt-free.
Does a Term Plan Provide Inflation-Adjusted & Tax-Free Benefit at Maturity?
Life insurers are renowned for their long-term safe investment options. After the sovereign government, life insurance companies are the only asset managers promising a guaranteed return on a 20-year investment plan.
Also, since this income is a direct pay-out from a life insurance policy, it is not taxable. You can choose to make this income grow over the years by a percentage of the initial pay-out.
This way the income keeps growing for the family and they can maintain their lifestyle in the long run.
For example, the iSelect Star term plan from Canara HSBC Oriental Bank of Commerce Life Insurance offers a 10% p.a. growth to the family’s monthly income. So, if your family starts to receive an income of Rs. 50,000 per month, it will keep growing by Rs. 5000 every year.
Thus, if you are salaried or have a business, the simplest way to ensure the long-term safety of your income to your family is with a regular income option of term insurance.