If you think a one-time settlement plan in term insurance is better than a secure income plan with monthly payments, then buckle up for this; you’re mistaken. Other than this, there are also several other features in term insurance where insufficient knowledge can lead to wrong decisions on the functions of term insurance.
To create a solid term insurance plan for your dependents, then you must know the basic functioning of a term insurance plan with maturity benefits. These will help you choose the best options within a term insurance plan and make life easier for you and your nominees. So, read on and go through the basics of term insurance with maturity benefits and the optimum selection of available options in a plan.
Term Insurance with Maturity Benefits
Term insurance usually doesn’t have any return of premium or other benefits when the policy term ends. But a term insurance plan with maturity benefits provides these benefits at the term-end to the policyholder if they survive. It is what makes these plans most suitable as savings or even investment plans.
In the case of plans with maturity benefits, there are two options to receive the amount. The first one is the one-time settlement of payments and the second one is a secure income plan which provides monthly payments for the rest of the life. Some might think that a one-time settlement is the best option, so they will choose it but will often suffer consequences.
Why is a Secure Income Plan Better Than One-time Settlement Plan?
As it is a matter of family financial protection and personal requirement investment, people keep a high life cover in term insurance with maturity benefits. So, the maturity amount is also similarly high. When a policyholder receives such a high amount through a one-time settlement, it causes some common money-related issues. These issues include safekeeping, income tax, family quarrels, TDS in bank deposits, and constant worrying about the large sum.
But through a secure income plan, a policyholder will never have to worry about any of these issues as they only get a limited amount of their liking each month. In this way, they can rest assured they will get income as long as the funds exist and avoid the issues that follow a large amount of money in hand.
What to do When There is an Urgent Requirement of Lumpsum Amount?
But what if the policyholder has an urgent requirement or invested money in term insurance with maturity benefits for a specific purpose? Insurers have a solution for this issue as well. They provide a 50-50 pay-out option, where the policyholder gets 50% of the maturity benefits at term-end. And the remaining 50% they will get as monthly benefits. Thus, combining the benefits of a one-time settlement and monthly income plan.
Such a combination is most suitable for people saving money for their children’s education or career, family and business requirements, or retirement funds. When the policyholder chooses a secure income plan or a combination plan, the remainder of the monthly payments will go to the nominee in case of their demise. Thus, their investment will not be in vain.
Now that you know the basic features of term insurance with maturity benefits, you won’t have trouble selecting the best option within them. Creating a plan in such a manner will further enhance the yields from a plan.