Latest Income Replacement Term Insurance Plan

What is Income Replacement Term Insurance Plan? 

Income replacement term insurance is a payout benefit option offered by a few of the term insurance providers. You are allowed to select the regular income option of payout for your loved ones along with the payment as a lump sum. It simply means that if the policyholder dies during the policy term, the nominee as stated in the documents of policy will get monthly cash regularly because of the loss of income every month. 

For example, a 32-year-old individual bought an income replacement term insurance plan having a sum assured amount of Rs.50 lakhs. He chooses a policy tenure of 35 years. If he dies at 52 years of age, his wife (nominee), as stated in the plan, will get a % of the sum assured amount i.e. Rs.50 lakhs for a static number of years. After the payment of the full sum assured amount to his wife (nominee), the plan ends and no other additional payments will be made. 

The above-discussed case is a basic example of an income replacement term plan. Various insurers offer customization under this scheme. You have the option to tailor-made the plan related to the policy term, sum assured, monthly payouts, etc. 

An income replacement term policy is an advanced version of a basic term insurance policy. It is a comprehensive plan which will fit the policyholder’s family well and provide them with the best benefits in case of his/her death during the policy tenure.

Why Should You Buy Income Replacement Term Insurance Plan? 

Following are some ways in which income replacement term insurance can secure you and your family: 

1. Monthly Installments 

   The nominee receives the monthly installments during the unfortunate demise of the life assured during the policy term. These monthly cash payments help your family in fulfilling household expenses and other types of financial obligations. This way, it compensates for the revenue loss resulting from the unfortunate death of the policyholder. 

2. Inflation 

   Income replacement term insurance policies provide families the option of increasing their income. An increase in the income of the family might be a better alternative, especially in the cases if they would be dependent on it for a long time. If a family is earning the same amount of money for a long time, their living standards will destroy owing to inflation. However, with the rise in their income, they will be able to continue their present lifestyle. 

3. Flexibility 

   Various life insurers offer different types of income replacement term plans. A combination of income replacement and a lump sum is the most predominant one. If you choose an option of combination payout under an income replacement term plan, the nominee will receive a part of the sum assured as a lump sum payout during a claim, and the rest of the benefit is payable in form of monthly installments. 

Who Should Buy an Income Replacement Term Insurance Plan? 

An income replacement term insurance is a death benefit policy with no benefit of maturity. If the policyholder dies during the policy term, the nominee shall get a % of the sum assured amount monthly as a replacement of income due to the income loss. Therefore, you should purchase an income replacement term policy: 

• If you have dependents in your family i.e., children, spouse, parents 

• If you want to offer financial protection to your dependents at low premium rates 

• If you know that it will not be easy for your family or dependents to come back financially on the position if something unfortunate happens to you 

• If you know someone who is having a monthly source of cash flow that is helping his/her family to meet all the important activities 

Important Factors to Keep in Mind While Buying Income Replacement Plans 

• Age is considered an important parameter that determines the premium amount. So, the earlier you purchase, the higher coverage you will receive for a lower premium rate. Moreover, the premium for this term plan remains unchanged throughout the policy term. 

• The term for income replacement term insurance plans ranges from 15-20 years. Though, various insurance companies in India provide long tenure for up to 60 years of age. 

• If you are the breadwinner in the family, then investing in this plan might be a smart decision to secure the financial future of the family even in your absence. 

• These policies offer financial protection to your loved ones through a fixed income every month. If you want high returns, it is suggested to invest in other alternatives such as ULIPs that offer market-linked returns. 

Wrapping It Up!

Income Replacement Term Insurance Plans are the right and ideal investment for those who are searching for low-priced insurance that secures the financial future of their family. However, to get maximum benefits at low premium rates, always make sure to purchase a term insurance plan at an early age.