Your monthly income is the heart of your financial well-being. With most inve-stments intrinsically offering accumulated benefits in the long run, many would like to opt for an investment that offers a monthly income. Products like traditional fixed deposits are offering this convenience, but combining insurance along with reparation of lost income is a new concept.
Monthly income plans or income replacement plans (IRIs) are financial instruments developed by insurance companies offering monthly income after paying premium for a certain period.
What are these plans Monthly income insurance plans offer you a guaranteed monthly income after paying premium for a certain number of years as per the policy terms. Once you reach the end of the premium paying term, the policy starts giving you assured monthly returns for a certain number of years.
The policy term in these plans is the sum total of both the premium paid and the payout term. The insurance cover remains valid through out the policy term, giving you the dual benefit of insurance and monthly assured income.
How much income can one get Monthly income insurance plans offer you an assured monthly income till the end of an agreed tenure. The amount of money you can get every month will depend on the premium that you are paying, the policy term and the payout option that you choose. The higher the premium you pay, the higher will be your assured monthly income. While monthly income is a great attraction, it involves a slightly higher premium payment. But this balances out by the positives of monthly income insurance plans.
Is this right investment plan This plan is suitable for families where only one member is working, so that the non-working spouse can manage the loss of regular income in the absence of the insured. This is also suitable for retirement planning, as you can get an assured monthly income when you are not actively working, thereby helping you with your monthly finances.
Monthly income insurance plans come with different terms. The most popular type of monthly income plans pay a lump sum amount on death of the insured and a regular monthly income thereafter for the beneficiary. There is another type of policy where only monthly income is provided to the nominee for a specific tenure.
The first type will be useful if the family of the insured has to take care of the loans or other debts of the insured, or if they have to meet any one-time big expense like daughter’s wedding or children’s higher education. These can be fulfilled with the lump sum, and at the same time, they would receive a monthly income as well.
The second type is suited for those who look forward to providing a monthly income to the beneficiary-ideally suited for families with no debts and for retirees.
The main disadvantage of this plan is that it usually comes with higher premium as compared to a plain vanilla term plan.
Snapshot of monthly plan Metlife Monthly Income Plan: The MetLife Monthly Income Plan offers an assured monthly income for maximum 15 years. You can choose the amount of monthly income as per your policy plan. The monthly income ranges from '1,500 per month to as high as '1 lakh per month. The premium payment term for the policy is fixed at 10 years. Under this policy, you pay your premium for 10 years and then convert your returns into a guaranteed monthly income for the next 15 years.
HDFC Life Super Income Plan: HDFC Life Super Income Plan is a popular plan offering guaranteed income from a period of eight to 15 years. The monthly income ranges from eight to 12.5 per cent of the sum assured on maturity. The plan has a limited premium paying term of 8, 10 or 12 years.
Max Life Monthly Income Advantage Plan: Max Life Monthly Income Advantage Plan is a savings-cum-protection plan that offers you guaranteed monthly income for 10 years immediately after completion of the premium payment term. A lump sum benefit immediately on death of the insured is also offered.
Bharti Axa Life Monthly Income Plan: It offers you assured benefits in the form of monthly income after the completion of premium payment term. The premium paying terms can be 15, 20 or 30 years, and benefits can be availed for 8, 10 or 15 years. If the life of insured expires during the policy term, a percentage of the sum assured is offered as monthly income to the nominee from the next policy month onwards.
The writer is the CEO of BankBazaar.com
