The idea of talking about the financial consequences of one’s death with one’s life partner is sticky and unappealing to many. This stems from the lack of awareness in our society regarding the extremely difficult financial situation our spouse falls into as a result of the death of the other spouse.
It is strongly recommended to talk about one's death with one's life partner. Term Insurance Plans have gained a lot of popularity in India and continue to be one of the bestselling insurance products out there. Many Indian householders opt for term plans for their high coverages and relatively lower premiums.
Although going for a term plan may well be one of the smartest financial decisions one ever takes towards protecting one's family from financial uncertainties, it is even more important to communicate with them the procedure to file a claim if ever the need arises. Similarly, it is important to let them know the other money moves that need to be made to protect your legacy.
Finally, as the title suggests, it is recommended that you opt for income-replacement term plans rather than lumpsum pay-out term plans. Here’s why:
- Your spouse and family members will already have lots of things to deal with after your death and may not be in a state of mind to think effectively when it comes to money. And they cannot become financially savvy overnight. In such a scenario, they could mismanage a lumpsum pay-out of the term plan.
- Typically, a term plan's pay-outs (regardless of the mode of pay-outs) are 10 to 15 times the policyholder's annual salary, which is sufficient to ensure all liabilities (home loans, car loans, and so on) are paid off and there is enough left over to maintain the same lifestyle while educating children in good schools. But managing this requires a lot of skill and a stable mind. However, an income-replacement plan by design replaces your monthly salary and things continue as normal, financially.
- Term plans exist that provide some proportion of the pay-out as a lump sum and reserve the rest for monthly pay-outs to replace your income. You can opt for these if you foresee a lot of loans and liabilities will need to be paid out immediately following your unfortunate demise.
- Similarly, term plans exist that provide increasing monthly income, where monthly income increases by 10-20% on an annual basis. This feature helps beneficiaries deal with the effects of inflation.
Last but not least, don't forget to let your loved ones know that whenever they need Claim Assistance, OneInsure will be there to assist the family in settling the claim. They can reach us at 86559-86559 or firstname.lastname@example.org.