Different Types Of Death Benefit Payout Options Under Term Insurance Policy

Term insurance plans are widely known for providing risk cover that is life cover, in case of an unforeseen demise of the life assured during the policy tenure, given the policy is still active, a death benefit that is the sum assured will be provided to the nominee. Some term insurance plans also provide maturity benefits to the life assured in case he/she survives the entire policy tenure. As mentioned earlier that the death benefit shall be provided to the nominee, under term insurance plans the nominee has the flexibility to choose from different death benefit payout options according to their financial requirements and current lifestyle. 

Commonon death benefit payout options available under a term plan are as follows:

• Lump Sum
• Regular Income 
• Part Lump Part Regular Income
• Increasing Monthly Income
• Part Lump Sum Part Increasing Monthly Income

Different Types Of Death Benefit Payout Options Under Term Insurance Policy

Below mentioned are the different types of death benefit payout options available under a term insurance policy:

• Lump Sum Payout

  Under lump sum payout option, the death benefit that is the sum assured is provided in one go to the nominee. This is the most common option chosen for receiving the death benefit. In case of an unforeseen demise of the life assured during the policy tenure, the insurance provider shall provide the benefit as lump sum to the nominee under this death benefit payout option. The nominee can further use the death benefit to invest in different market linked investment option options or use the death benefit to fulfill their immediate financial expenses. 

Also read: How to Choose the Duration of a Term Insurance Plan?    

• Staggered Payout

  If you have a doubt that your financial dependents may not be able to manage the huge amount received as death benefit, then you must not worry because some insurance providers offer a staggered death benefit option under which the life assured’s financial dependents shall receive a part of sum assured as lump sum and the remaining sum assured shall be provided as equal monthly instalments for a certain period of time. The nominee can also opt for lump sum with increasing monthly payout

• Fixed Monthly Payout

  Under fixed monthly payout option, the entire sum is provided as equal monthly instalments over a period of time. In case of an unforeseen demise of the life assured during the policy tenure, the insurance provider will provide a death benefit to the nominee, the death benefit will be equal to monthly instalments over a pre-fixed period of time. The nominee can use this death benefit payout option to fulfil one-time financial obligations that may occur during different stages of life. 

• Increasing Monthly Payout

  Under the increasing monthly payout option the sum assured is provided as monthly instalments with a yearly increase of pre-decided percentage of the sum assured. The nominee can choose to opt for Part Lump Sum and Part Increasing Monthly payout. In case of an unforeseen demise of the life assured during the policy term, a death benefit equal to 50-60% as lump sum and remaining as increasing monthly payout shall be provided to the nominee. 

To Conclude

Above mentioned aspects can help a nominee make a wise decision while receiving the death benefit payout. Choosing a correct death benefit option, keeping in mind the lifestyle, expenses, dependents, will allow your financial dependents to live a worry free life in your absence. 

Also read

Who Should Be The Nominee For Your Term Insurance?    

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.