Topic 3: Here’s how you can ensure your family gets a regular monthly income

Working professionals think that buying a term insurance plan ensures the financial security of their dependent families. But this is only partially true. Planning for emergencies is a good habit and teaches us to factor in situations that may happen anytime, anywhere. But when it comes to regular expenses, it’s equally important to have the right kind of backup plan.

As you plan to secure your family’s financial future, spare a thought and consider the regular things that may be affected due to the breadwinner’s untimely death. If you have a loan to pay, it can be settled with the lump sum amount received from the insurer. But what about the recurring expenses like electricity bills, telephone, mobile and internet bills?

What can you do to tide over this is to get is a term insurance plan with monthly payouts. The staggered payouts can help you fix basic things so that your family doesn’t have to bother about them on a regular basis.

Staggered payouts: Whom does it suit?

Instead of a huge lump sum payment, the claim amount is disbursed over 10-15 years in the form of regular monthly payouts. The family of the policyholder gets a monthly payment, which can be pre-decided while buying the plan. Some term insurance plans even increase the payment by 10 percent every year to account for inflation. Such plans are best suitable for families with low financial literacy.

Why a term plan with monthly payout option?

Return-savvy investors may argue about the need for term insurance plans with monthly payout options since no payment is made in case the individual survives the policy term.

But it’s vital to understand that a term plan cannot be compared with investment options because it’s a pure risk cover that gives peace of mind at a nominal cost.

There are plans available online that can give a regular income of Rs 50,000 to the individual’s family at cheap premiums. For a 30-year-old male, the premium comes to around Rs 400 a month. For such a small monthly premium, the individual can ensure that in case of death, his family can still get Rs 50,000 every month to cope with the monthly expenses. It can be purchased online directly from the insurer’s website in as little as 10 minutes. One added bonus is that these plans also give tax benefit under section 80C of the Income-tax Act, 1961.

The regular monthly income ensures that one can take care of even the smallest of needs their families have, like grocery, ration and utility bills; even the fortnightly, monthly family outings, without having to bother about the loans and other liabilities.

There are several investment products that give regular returns, but term insurance plans are ideal for families that are dependent on a single income.

Make a checklist

The simplest thing you can do to make sure your family doesn’t go through a monetary set back, when you are gone is to make a quick checklist for regular expenses. Here are some such expenses:

Monthly rentals or home loan EMIs,

Car loan instalments,

Utility bills,

School/college fees,

Monthly supply of eatables,

Discretionary expenses like family outings.

Monthly premiums below Rs 500 for a regular income of Rs 50,000 can ensure your family is able to live the lifestyle you have designed for them, in case of an unfortunate demise.

Life is good till the time your savings account is swells up every last day of the month. Spare a thought and think of the ordinary days when you are not around anymore to take care of your family.

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