Life insurance is the most fundamental way of managing risks for any individual. When someone buys life insurance, they pass on the cost of any probable loss to the insurance company. The insurer provides coverage from unforeseen contingencies in exchange for a predetermined premium. Life insurance comes in many forms, such as guarantee¹ insurance plans, ULIPs, monthly savings plan, whole life insurance, term life insurance, etc.
 

In this article, we will focus on the monthly income plan in life insurance and its various aspects.
 

What is a Monthly Income Plan?
 

Income plans work best for risk-averse investors as it offers insurance coverage along with guaranteed¹ regular pay-outs and maturity benefits. These plans offer a steady income to the policyholder at a predetermined percentage of the sum assured as directed by the insured at the time of buying the policy. The most suitable example is monthly income insurance.
 

The monthly Income scheme is different from the basic term insurance as the sum assured is paid in monthly instalments to the beneficiaries instead of a lump sum pay-out in case of the policyholder's death. The insured hand-picks between a fixed monthly payment or an increasing monthly payment option at the time of purchase of the policy. Hence, these instalments act as a substitute for an individual's salary. Such steady incomes provide your dependents with adequate funds so as to meet their daily expenses instead of having to deal with a large lump-sum amount. Thus, this constant cash inflow acts as a safety net for your loved ones against any unforeseen financial crisis.
 

What are the benefits of a Monthly Income Plan?
 

A monthly income plan under term insurance comes with a host of benefits. Some of the advantages are discussed below for your better understanding.
 

• Affordable premiums:

  A distinct feature of this policy is its affordable premium rates. This ensures that the policyholder need not set aside a large chunk of his income towards premium payments. This helps you to maintain a balance between your current requirements and your future financial goals.
   

• Fixed Income:

  A monthly income scheme is significant for any family as it offers constant cash inflow. In the absence of the breadwinner or regular pay after retirement, these scheduled monthly payments can assist the dependent family in catering to recurring expenditures and sustaining a good standard of living. This gradually helps to attain a sense of financial stability in life.
   

• Tax^* Benefits:

  Premiums paid towards the policy are subject to tax^* benefits under Section 80C of the Income Tax Act, 1961. The policyholder also enjoys a tax^* exemption under Section 10(10D) at the time of the policy's maturity. These benefits are subject to certain terms and conditions.
   

• Additional Coverage:

  The monthly income insurance plan under term insurance provides the flexibility of attaching additional coverage in terms of riders^{^}. Riders are an optional coverage in addition to the existing insurance plan to enhance the benefits and protection provided by the initial policy. Accidental death rider, waiver of premium rider, etc., are some of the examples of optional riders.
   

• For Risk Policyholders:

  A monthly income plan is an insurance policy that is apt for risk-averse people. This policy is associated with a  risk factor that will not affect your savings. The investment is put into -securities like dividend stocks, preference shares, and other fixed-income generating instruments.
   

• Liquidity:

  A monthly income plan offers a reasonable liquidity rate. With a zero lock-in period pertinent to the investment, the policyholder can withdraw their capital to meet an unexpected financial crisis.
   

• Renewability:

  As under term insurance, a monthly income plan allows the insured to renew the policy. Therefore, the insurance does not have to end with the completion of the policy term. Subject to policy terms and conditions, you can reactivate the policy and avail yourself of all the benefits until the extended term ends.
   

 

Monthly Income Plan as a Supplement to Primary Income Source:
 

As the pandemic has gripped the world in its claws, everything seems to be uncertain. This has become a cause for tremendous stress for the breadwinners of a lot of families. In these trying times, a monthly income plan has come as a relief for many families. This plan involves life coverage for the policyholder and acts as an add-on for his primary income source. A monthly income scheme is more lucrative as it offers a consistent payment every month. This payment is guaranteed¹ and assures the policyholder of receiving a pre-determined fixed amount every month without fail. The premiums paid towards this insurance plan can be paid monthly, annually, quarterly, or half-yearly depending on an individual’s financial goals and current requirements. On the off chance that the policyholder dies during the policy term, the insurance company will pay this fixed monthly amount to the nominees of the protected individual.
 

Facts to consider before investing in a Monthly Income Plan:
 

• Long-term and short-term financial goals that you wish to achieve.
• Your current expenses along with your future requirements.
• The period of your investment as per your convenience.
• The payment options available for the particular insurance plan.
• The amount of pre-defined premium that you are comfortable with.
• Scope of wealth management and income generation of the policy.
• Your current financial standing and risk appetite.
• Tax^* benefits and savings that you might be able to avail with the help of the plan.
  
   

Conclusion:
 

Before buying an insurance policy, individuals should also consider the fluctuations in the market conditions like inflation, cost of living, etc. Individuals planning on investing in any monthly income plan should first and foremost comprehend their financial requirements and the benefits they wish to derive from the policy. With the rise in financial organisations providing different insurance policies, one reliable option would be the TATA AIA policy which offers guaranteed¹ returns and a life cover to protect you and your loved ones. It allows you to plan your current needs and future goals and requirements. It would, hence, be a wise decision to invest in an insurance plan to have a stress free life.

 

L&C/Advt/2023/Mar/0797