Life Insurance Settlement Option

• Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
• Claim up to Rs. 1,50,000 deduction under section 80C**
• Choose between annual and monthly premium payment options

A life insurance policy is meant to provide financial security to one’s dependents in the event of an untimely death. Thus, while it is necessary to have a life cover at all times, it is all the more necessary to pick the right type of life insurance policy and opt for a settlement payout option that will meet the needs of your dependents. Insurance providers nowadays offer life insurance policies with a number of customised payout options. Thus, it is necessary to be aware of the various payout options so you are able to make an informed choice when purchasing a life insurance policy.

Common Types of Life Insurance Settlement Options

When purchasing a life insurance policy, you may find that the death benefit payout option is pre-specified in the policy brochure. In such cases, you will not have the option of choosing a payout option as per the needs of your beneficiaries.

However, for certain other life insurance policies, the insurance company may specify various death benefit payout options and will give policy buyers the option of selecting a payout option that is well suited to the needs of their dependents. Thus, when you purchase a life insurance policy, it is extremely important to check the benefits offered by the life insurance policy and the payout options that are provided by the insurance company. Read on to know more about the common types of life insurance settlement options.

• Lump-Sum Payout: The lump-sum death benefit settlement option is one of the most common payout options offered by life insurance companies. In this case, if the life assured happens to meet with an untimely death during the policy tenure, the death benefit will be paid to the nominee of the life assured in a lump sum. The lump sum death benefit payout option is a good choice for individuals with loans and liabilities since the lump sum payout will help one’s nominee clear off any outstanding debts. This payout option is a good choice for individuals who are financially disciplined and those who know how to invest the lump-sum payout in order to receive good returns through it.
• Lump-Sum Payout with Regular Income: In this case, in the event of the life assured’s death, the nominee will receive a lump-sum payout and a fixed income on a regular basis from the insurer. This type of payout option is ideal for policy buyers who have loans but would also like their families to receive regular income to pay for their immediate and recurring financial needs.
• Lump-Sum Payout with Increasing Income: Under this settlement option, the nominee receives a lump-sum payout from the life insurance company in the event of the policyholder’s death. In addition, the nominee will also receive regular income that will increase on a periodic basis. This type of a payout option is ideal for individuals who would like to ensure that their nominees are protected against the effects of inflation.
• Lump-Sum Payout and Regular Monthly Income up to the Child Attaining 21 Years of Age: This type of a death benefit payout is an ideal option for individuals with young children. The policy pays a lump sum payout to the nominee upon the policyholder’s death and also continues to pay regular income to the nominee until the life assured’s child attains the age of 21 years. This type of payout option ensures that your child is able to complete his/her education without having to go through any financial hassles.

Which Settlement Option Should You Choose?

The type of settlement option you choose should match the financial requirements of your dependent. For example, if you are the primary breadwinner of the family, it is a good idea to opt for a life insurance policy that pays out a lump sum death benefit and regular monthly income. This will ensure that the payout acts as an income replacement, thus helping your loved ones pay for their financial needs. On the other hand, the lump sum option is a more suitable choice for individuals who have significant debts since this will ensure that your nominee does not have to go through any financial hassle to pay off your loans/debts.

In conclusion, when you purchase a life insurance policy, you should make sure to assess the needs of your dependents, your liabilities, and investments/savings and opt for a death benefit payout option accordingly. You should also make sure to read through the policy brochure in detail to ensure that you are well aware of the terms and conditions of the policy before purchasing it.