People are often baffled about what is to be done with the benefits received from a life insurance plan after the demise of the policyholder. You can invest it to generate a regular income, make use of a fraction of the lump sum every month until it ends, or look for another means to channelize the profits efficiently.
When incidentally you meet an accident that render you disabled for some time, the major area of concern after your disability will be the source of income. If you are the sole earner in your family, it will create uneasiness amongst you and your family. At this point of time, if you had Income Replacement Insurance your life would have been much easier. Income Replacement Insurance substitutes a share of your income if you become unable to earn through injury or illness. This will make your life much easier and will allow you to recover soon without any anxiety. Plan Insurance provides you with different policies which give you different options of time and benefits.
Keeping this in mind, a lot of life insurance companies have introduced a new plan variant of life insurance – an income replacement life insurance plan. These plans come with an aim to rescue if the insured has a feeling that his dependent might not be able to handle or invest the lump sum payout efficiently.
Income replacement plans, after the demise of the policyholder, payout fraction of the benefit as a lump sum, and also make payment of regular monthly income over a specific period, for about 10-15 years, for example. In other words, the income replacement plans break the entire assured sum into a one-time payment, along with a continued monthly compensation. But this is not enough to make these plans interesting. The total amount received by the beneficiary or the nominee, over a period of time, is more than the sum assured mentioned in the policy.
Income replacement life insurance products make sense for sole earning households, and where your spouse or family is not financially smart enough or is comfortable in making robust decisions about investments.