If you are an earning member, your family could be left financially stranded if something is to happen to you and you have to leave them behind. Term insurance could come to your family’s rescue here, if you are properly insured.
But what if the rest of your family members are either too young or not financially educated enough to handle a big sum of money?
Insurance companies thought of this too and they will say that income replacement term insurance is a possible answer.
But what is an income replacement term insurance plan? Let’s take a look.
Income replacement term insurance plan
in a traditional term life insurance, the beneficiary will get the insurance amount mostly in lump sum, according to the terms and conditions of your specific plan.
But at the same time, in an income replacement term plan, the insured sum is paid out to the beneficiary as a monthly income for a certain period of time. This monthly income will be a percentage of your total insured sum and insurance companies allow customisations when you select a plan itself.
Why should you choose an income replacement term insurance plan?
Below are a few of the benefits of an income replacement plan that might work for you–
- It will continue to give your family a steady income – Through customisations, you can choose an amount that will be nearer or above your approximate income. This will make sure that your family gets the income you used to provide them, even in your absence, and there won’t be a financial crunch.
- It helps if your family is financially uneducated – A lot of people don’t know what to do with money. This happens when they don’t have enough financial education to know where to invest or park the money. If you come from such a family and your dependents are too young or financially uneducated to be left with a huge sum of money, this plan will help them. This way, your family will get a stable income and you can be sure that it will not be lost in one go.
- It helps your family meet their expenses – If your family is financially stable enough and doesn’t require a lump sum of money, even in your absence, choosing a income replacement plan will make sure your family gets monthly income that can be used to meet their day to day expenses.
When not to choose an income replacement plan?
There are situations when an income replacement plan will not work for you or your family, here are some of those possible situations-
- When you have a lot of debts – If you have debt or loans, choosing an income replacement plan could become a bad idea. This could mean that your family is not able to pay back your debts in one go and money managing could become difficult.
- If your dependents are mature enough to handle money – If your family is capable of handling a big sum, your money could be invested in better opportunities. Only getting a part of your insured sum every month could hinder such investment options.
- If your family is likely to have sudden needs – If you have a family member who is ill or if you have children who are studying, not having a lump sum amount could become difficult when there is sudden financial needs. In such situations, a traditional term plan could work better.
How to buy an income replacement plan?
If your choice is an income replacement plan, buying one is easy, especially online.
You can go to any insurance provider or broker website and do your research first. You can use tools like a term insurance premium calculator that will help you choose better.
Once you’ve chosen one, you just need to register and follow the simple procedures.
A term insurance means financial stability to your family, even in their worst times. The financial stability of your family is not something you can leave to chance. Do your research using tools like a term insurance premium calculator and get insured today!