Payout Insurance Options by Different Insurers

A life insurance payout will give much-required financial security if you lose the policyholder who can be your spouse or partner. If you are a beneficiary, you could use the amount to pay for funeral costs, to pay bills, for covering the child care cost, or for children’s higher education. The choice is yours. So, to fulfill your life goals, you receive the life insurance payout. There are several options available when it comes to life insurance payouts. It is very important to understand these options so that you can select the right one as per your requirements.

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What is a Life Insurance Payout?   

A payout is a death benefit provided to beneficiaries or dependents of a term insurance plan when the policyholder dies. At the time of signing up for the policy, the policyholder has to decide how the death benefits will be paid out. The decision of selecting a payout option should be based on financial understanding, financial liabilities of your family, and any other objectives. 

Types of Payout Options 

Typically, the life insurance plans offer two types of payout options to the life assured or the nominee/beneficiary. If the policyholder passes away before the completion of the policy tenure, the insurer pays the death benefit equivalent to the sum assured to the nominee. If in case the life assured has outlived the policy term, the insurance companies pay the maturity benefit along with the bonus. 

The payout received by the nominee in the form of a death benefit is generally pre-determined. The amount received by the policyholder varies based on the policy type you avail, its T&Cs, and its returns in case of maturity benefit. 

  1. Lump-Sum Payout 

    This option is the most popular one as it involves receiving the death benefits on a go. In case the life assured dies in an unfortunate event, the insurance company pays a lump sum amount equivalent to the sum assured to the beneficiary/nominee of the policyholder. 

    In this, the sum assured amount as maturity or death benefits are paid out to the life assured or their nominee/beneficiary in a form of a single payment. This lump sum payout might also include bonuses and loyalty additions. Single payments make sure that the policyholder or his/her nominee receives a substantial amount of money in one transaction so that he/she can select to invest in other instruments or use it for fulfilling some sizable expenses such as repayment of debts, college fees, housing loans, or down payments. 

  2. Periodic Payouts 

    In periodic life insurance payouts, one part of the benefits are payable as a lump sum amount, while the remaining benefits might be converted to installments or annuities. These are paid by the insurance company over the term of a pre-determined period. In this manner, the policyholder enjoys a steady flow of income that can help meet the periodic payouts (regular) expenses such as utility bills, rent, or EMI payments included in the repayment of a loan. 

Steps to Receive the Payout 

The main step in receiving a life insurance payout is to file a request for a claim with the insurer. This can be done in 3 ways: 

  • File a claim online on the company’s website or using a mobile application. 
  • Contact the insurance company over the cell phone and file your claim.
  • Visit the company’s nearest branch office and then submit a written application along with the claim form.

Payout Insurance Given by Different Insurers     

Different insurers offer different options of payout. Choose wisely as per your requirement. Let’s discuss three insurers: ICICI Payout Term insurance, PNB Payout Term Insurance, and Max Life for your smooth understanding of payout options. 

  1. ICICI Payout Term Insurance 

    ICICI Pru offers four payout options which are: 

    • Lump-Sum: The entire amount of benefit is paid as a lump sum 
    • Income: 10 percent of the benefit amount will be payable for 10 years in equivalent installments every month. The nominee has the option to receive the 1st year benefit as a lump sum and the monthly income will initiate from the succeeding month for nine years. 
    • Lumpsum and Income- The % of the sum assured amount is payable as a lump sum that is chosen at the commencement of the policy. The balance amount will be paid in equal monthly installments for a month over ten years. 
    • Increasing Income: The benefit is payable in installments every month for ten years, starting with 10 percent of the amount per year in the 1st year. The income amount will increase by 10 percent per year simple interest every year after that. 

    Your beneficiary will have the option to convert some or all of his/her monthly income into a lump sum amount. The lump-sum amount is the current value of the future payouts computed at 4 percent of the discounted rate. 

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  2. Max Life Insurance 

    Max Life offers three payout options: 

    • One-time Lump Sum Payout: In this, a lump-sum payout is offered to the nominee in case of the policyholder’s death. Max Life Online Term policy pays 100 percent of the SA instantly to the nominee upon the life assured’s death. 
    • One-time Lump Sum + Fixed Monthly Payouts: In this, the nominee will receive 100 percent of the SA as a lump sum payout along with an additional payout every month for the next years. Max term plans pay 100 percent of the SA instantly to the nominee upon the policyholder’s death along with a 0.4 percent of the sum assured amount paid every month for 10 years. 
    • One-time Lump Sum + Increasing Monthly Payouts: In this, 100 percent of the sum assured is paid instantly to the nominee upon the policyholder's death along with the increasing income every month for 10 years which is 0.4% of SA for 1st year, and increasing yearly by 10% of the 1st year’s monthly income.
  3. PNB Payout Term Insurance 

    PNB MetLife offers four payout options:

    • Full Lump Sum Payout: In this, the basic sum assured amount in a lump sum is provided to the nominee.
    • Lump Sum+ Regular Monthly Income Plan: In this, PNB offers 50 percent of the basic SA to the nominee in a lump sum and the rest of the amount in monthly installments for 10 years in case of an unfortunate event. 
    • Lump-sum + Increasing Monthly Income: PNB offers 50 percent of the basic sum assured as a lump sum and an increasing income every month for 10 years at 12% per year. 
    • Lump-Sum + Regular Monthly Income (till your child turns to be 21 years): This option is only available for the policyholders with a child having an age less than or equal to 15. It offers a lump sum payout equivalent to 50 percent of the SA during the claim along with a regular monthly income till your child attains 21 years. 

Wrapping It Up!

Term insurance investment provides you and your family with a financial security net which is much-needed during critical times. Term insurance policies could provide financial protection in case of an unfortunate event. Term insurance premium calculator is available online and is free of cost, using which one can calculate the estimated premium required to pay based on the desired sum assured.

Written By: PolicyBazaar

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