Written by
Updated :
Reviewed by
If you’re here, you’re obviously looking for a term plan, but you’re not entirely sure which of the available options would suit you. By the end of this article, that will change!
Now, before you can actually get around to buying the best term insurance plan for yourself, it is important for you to know the different types of payout options available with term plans.
Let’s look at Max Life Insurance’s Online Term Plan Plus product which offers 3 unique payout options:
What are the different types of Term Insurance Payouts?
Term insurance plans are simple. You pay a regular (monthly, quarterly, half-yearly or annual) premium, for which you get a life cover. In case of your death within the tenure of the policy, your family would receive a pre-determined amount which will help them financially. However, how the payout is made to the nominee can be chosen by you at the time of purchase, on the basis your assessment of which payout option will best suit your family. The payout options are classified into three:
1. One-time Lump Sum Payout: This option offers a lump sum payout to the nominee, in case of an event of death of the policyholder. Max Life’s Online Term Plan Plus offers to pay 100% of the sum assured immediately to the nominee on the death of the life insured.
For example, if you were to purchase a lump sum payout plan that offers a life cover of Rs. 1 crore, this entire amount would be paid to your nominee all in one go as a lump sum, upon your death. To know more details about the Basic Life Cover option by Max Life, click here.
2. One time Lump Sum + Fixed Monthly payouts: In this case, the nominee will get 100% of the sum assured as a lumpsum payout plus an additional payout each month for the next few years (as chosen by the policyholder at the time of purchase of the plan). Max Life’s Online Term Plan Plus offers to pay 100% of the sum assured immediately to the nominee on the death of the life insured, plus 0.4% of the Sum Assured is paid per month for 10 years.
For example, if a Rs. 1 crore cover was purchased under this scheme, your nominee would receive a one-time payout of Rs. 1 crore immediately, and then a fixed amount of Rs. 40,000 will be paid for the next ten 10 years.
3. One time Lump Sum + Increasing Monthly Payouts: This third type of term plan offers a one-time payout immediately at death of the life insured, followed by monthly payout which increases every passing year for a fixed time period. Max Life’s Online Term Plan Plus offers to pay 100% of the sum assured immediately to the nominee on the death of the life insured, plus increasing monthly income for 10 years which is 0.4% of Sum Assured for the first year, increasing every year by 10% of the first year’s monthly income.
Taking the example of the Rs. 1 Cr life cover, the nominee gets the entire Rs. 1 crore immediately at the time of death of the life insured, then Rs. 40, 000 is paid every month for the first year. From the second year onwards, this monthly payout amount is increased by 10%, and it continues to increase by 10% each year for 10 years from the year of death of the life insured. Hence in second year, the monthly income to be paid out every month would be Rs. 44,000 and so on.
How to Choose the Best Term Plan for yourself?
Now let’s see which of the above would suit you. Ideally the type of term plan you choose, should depend on the financial goal/ liability that you intend to cover with it. Meaning, different life stages would require different term plans.
Life Stage |
Term Plan variant to be considered |
How it will help |
Young and unmarried |
Term plan with a one time lump sum payout |
At this stage of life, your liabilities include an education loan repayment or helping your parents pay out the loans that they may have taken for your future (like marriage, higher studies etc). Hence, a term plan is essential for you to ensure that all these liabilities are taken care of, even in case of an unfortunate event of death. The variant that would best suit you would be a ‘One-time Lump Sum Payout’ as the money received immediately can be used to pay off all loans by your parents and they wouldn’t be in financial debt anymore. |
Married with no children |
Term plan with a regular monthly income |
As you start to build a life together with your spouse, your income would be an essential part of running the household, and you may even avail loans. A term plan with a monthly payout would be like a replacement of your income and will lessen the financial burden on your spouse. |
Married with young children |
Term plan with a lump sum payout and an increasing monthly income |
When your children come into your life, they become your top priority. You want to do everything in your power to make all their dreams come true and help them achieve their full potential. A term plan with a lump sum payout followed by an increasing monthly income would assist your nominees close any financial liabilities (like loans) that you may have had, the increasing monthly income while also meeting their everyday expenses like school fees, grocery bills and other daily household expenses. |
Parents with children in high school |
Term plan with a lump sum payout and an increasing monthly income |
As your children approach their graduation, it becomes necessary to financially prepare for their university education, which is considerably more expensive. In such a situation, a term plan with a lump sum payout and an increasing monthly income would provide the financial support your family requires. |
Nearing retirement |
Term plan with a life cover and an increasing monthly income |
In retirement, you require a corpus to enjoy your golden years. While you may have saved enough, you still require complete peace of mind, especially if you have to provide for a spouse as well. A term plan with a life cover and an increasing monthly income would assist with the corpus and help your spouse/ nominee meet all the rising costs, giving you the peace of mind that they will be taken care of even in your absence. |
Now that you’ve learnt how important your life stage is in deciding which term plan is best for you, be sure to consider your liabilities, decide your financial goals, research well, and read the fine print of your term plan, before choosing one.
ARN:- Jul21/BG/19