Priya is the sole breadwinner of her family of three including her young daughter and elderly mother. She constantly worries about the financial security of her family in case she dies. Naturally, she opts to take an insurance policy. While doing research about various insurance policies she comes across Monthly Income Insurance Plans (MIPs) and is completely floored by their features and simplicity. It not only gives her lump sum at the end of the policy but also promises to pay a fixed amount of money every month for a prescribed number of years so that a regular source of income is maintained. She decides to take a closer look at these plans to assure herself that it is indeed the best for her family’s financial needs.
Here, we give the points that she looked at which would undoubtedly help you too.
Type of payments you can opt for
Be clear as to the type of plan that you want. A lump sum payment is generally paid at the end of the policy term. But the start of the monthly payments varies from plan to plan and so also does the tenure of these monthly payments. Some plans start payouts only after the premium payment period has ended while others start payouts even during the premium paying term. You can also choose from fixed income and increasing income options.
Premium payment modes you can opt for
Suppose Priya has got a bonus of Rs 5 lakh. She could use the whole amount to make a one-time premium payment. But if her bonus is just Rs 10,000 then she could opt for an annual, half-yearly, quarterly or monthly premium. Some policies also give the option of reduced premium payments after a certain number of payments.
Bonus payment modes
Most MIPs give bonus at the end of the policy term while others give a recurring bonus at fixed intervals. The bonus is of three types – Terminal (paid at the end of the policy period), Revisionary (Depending on the company’s yearly performance and is added to the bonus amount due to the insured) and Interim bonus (Declared in the interim period of the policy).
Cost of the plan
Always ask for the cost of the plan. For this go into the details of the plan and make sure to look at other factors like the time of receiving the payouts. Plans that start giving payouts early help you save more money as the payouts can be used to pay the premiums or can be invested in some other instrument of your choice. It means that you save money.
Maturity benefits offered
Most plans give you the option of getting your maturity benefit in a lump sum or to be added as part of the monthly benefit. You can also opt for payment of maturity benefit in instalments.
Payment in case of critical illness
Some plans even provide monthly payout benefit in case you are diagnosed with a critical illness as mentioned in the policy. However, such an option is voluntary and comes at an added cost.
Monthly income plans are great for retired people and for those looking for hassle-free regular payouts that do not erode their insured capital. Thus such plans are a good choice for people looking for monthly returns with capital protection rather than capital growth.
Income benefit option is always good as it prevents a lump sum payment from being misused. In case of lump sum payout, not every nominee has the financial acumen and the wherewithal to invest the money wisely. This could prove to be disastrous for the well-being of the family. Priya’s mother is aged and can’t be expected to be financially savvy and her daughter is too young so a monthly/staggered payout is the best option for her.
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