Insurance Tips: Why the salary protection insurance is important? Click here to know the details...
Salary Protection Insurance: Financial security is a big question for a salaried person working on salary. This crisis has intensified amid the pandemic and economic ups and downs. Salary Protection Insurance i.e. Salary Protection Insurance can also be a better option from the point of view of financial security for the salaried people. Now most of the life insurance companies are offering this plan. It is a term insurance policy, which offers a regular income payout. It is also known as income protection insurance. Before taking a policy let us understand its aspect in detail.
How can you take advantage?
While buying such a term insurance policy, you can choose the mode in which you want to take the total sum assured. You can take this in two ways – first regular income and second one lump sum. Such people who are not investment-savvy or want to opt for low but guaranteed returns, can opt for a term policy with regular income payout option.
A term plan with regular payouts
However, buyers should know that this is a term policy without any maturity benefit. In case of death of the policyholder only the nominee receives an assured death benefit – lump sum amount. According to market experts, regular payments are made for a certain period after the death of the insured, as per the terms of the salary insurance policy. It is basically a term plan with regular payouts.
When you buy salary insurance or income protection term insurance policy, you have to select the monthly income that you want to give to your family. This can be less than or equal to your current monthly take-home income. After that, you have to select the policy and premium paying term. For example, at the age of 30 (for a non-smoker), you can buy a policy for 15 years for a regular premium paying term.
Understand the policy
The insurance company can also increase the annual percentage on your monthly income. For example, the insurer may offer you an annual compounded growth rate of 6% on this income. This means that each policy year, the monthly amount will be 106% of the monthly income of the previous year. Let's say you had opted for a monthly income of ₹50,000 at the time of purchasing the policy. In the second year of the policy, this monthly income will increase to ₹53,000, and thereafter to ₹56,180 in the next year. Now, let us consider the case of unfortunate death of the policyholder at the beginning of the fifth policy year. The nominee will get an assured death benefit of ₹7.6 lakh and an increased monthly income of ₹63,124.