Income Replacement Insurance Plan provides financial support to your family in the form of regular income payments in the event of your unfortunate death during the policy term. This plan is designed to help your loved ones maintain their standard of living and meet their daily expenses, making it an essential financial safeguard for their future. In this article, we will understand the benefits of an Income Replacement Insurance Plan, how it works, and how to choose the right term plan for your needs.Read more
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An income replacement insurance plan, also known as a term plan, refers to a life insurance policy designed to provide financial support to your family or dependents in the event of your unfortunate death. This plan is designed to replace a portion of your income to help your loved ones maintain their standard of living and cover essential expenses after you're gone. You can either choose to receive the payout in lump sum or periodic payments.
Let’s understand this with the help of an example:
Mohan, a non-smoking man of 30 years age, with annual salaried income of Rs. 11 Lakhs, bought a term insurance plan (a type of life insurance) to financially secure his loved ones. Since he is the single bread-earner of his family, he wanted to make sure that he buys the best term plan for his dependents. He compared from amongst 15+ term plans on Policybazaar and chose the plan that best suited his preferences. Mohan chose 1 Crore life cover for a policy term of 30 years and will now be paying Rs. 948/month for the next 30 years to keep his loved ones secured. Hence, in the event of his unfortunate death, Mohan’s income will be replaced by the life cover that his nominees will receive as the death benefit.
An Income Replacement Insurance plan covers the following benefits:
The primary purpose of this plan is to offer a death benefit, which is a lump-sum payout to your beneficiaries if you pass away during the policy term.
Instead of a single lump sum, this plan provides a regular income stream to your family, typically in the form of monthly or annual payments.
The income is intended to replace a significant portion of your lost earnings, ensuring that your loved ones have financial stability after your death.
Some plans offer flexibility in terms of the payout period and whether the income is fixed or inflation-adjusted.
You can tailor the plan to align with your family's specific requirements.
Moreover, you have the flexibility to receive the payout in lump sum or periodic payments.
Unlike some other life insurance types, Income Replacement Insurance plans typically do not have a savings or investment component.
They are pure protection policies focused on income replacement.
Premiums paid for term insurance plans may qualify for tax benefits under the Income Tax Act in many countries, including India.
You designate beneficiaries who will receive the income payments in the event of your death.
These beneficiaries can be family members, dependents, or anyone you choose.
Income Replacement Insurance offers peace of mind, knowing that your loved ones will have financial support even if you're not there to provide for them.
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Here are some reasons why you should get an income replacement term plan:
It gives your family a regular income if something happens to you, like a monthly paycheck to cover bills and expenses.
If you own a business, it can keep your company running smoothly by providing money for business needs if you're not there.
You get to pick how many years the plan lasts, which can match important events like your kids finishing school.
Instead of using up your savings, the plan keeps your savings intact for other things you might need.
If you're a single parent, it's like a safety net for your kids, making sure they have what they need even if you're not there.
*Note: You can use the term insurance calculator to easily calculate your premium amount of your chosen term plan.
Here is a list of people who should opt for an Income Replacement Insurance plan:
Anyone who is a single bread earner and responsible for his/her family's financial livelihood and sustenance should strongly consider this plan.
Parents with children or other dependents who rely on their income to meet daily needs, educational expenses, or other financial commitments.
Homeowners with outstanding mortgage loans can benefit from this plan, as it can help ensure that their family can keep the house even if they're no longer there to make mortgage payments.
Business owners and entrepreneurs can use an income replacement insurance plan (term life insurance plan) to safeguard their businesses by providing a financial cushion to cover business-related expenses or succession planning.
Single parents should consider an Income Replacement Term Plan to guarantee ongoing financial support for their children in case of their unexpected absence.
*Note: It is recommended that you firstly know what is term insurance and what its features are before you buy it as an income replacement method.
Here are the steps to buy an Income Replacement Insurance plan from Policybazaar:
Step 1: Visit Policybazaar’s official website and go to Term Insurance
Step 2: Fill in the basic details such as date of birth, name, contact details
Step 3: Next, click on ‘View Plans’
Step 4: Mention details about your smoking or tobacco habits, annual income, occupation and education.
Step 5: Choose the plan that suits your financial needs and proceed to pay.
Step 6: Select your preferred payment method and pay to complete the purchase.
An Income Replacement Insurance Plan serves as a crucial financial safety net for those who provide for their families, have dependents, or wish to protect their businesses. Hence, you should compare from amongst 15+ insurers on Policybazaar and choose the plan that best suits your needs and safeguard your family for the long run.
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