Different Death Benefit Payout Options Under Term Insurance Policy.
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The amount of funds payable as death benefits or as maturity benefits are generally specified upfront, so the policyholder is aware of the minimum amount they’re eligible to receive at a later date. However, many insured people remain unaware of the process involved in raising a claim and obtaining term insurance payouts when the time comes. To understand this process better, here’s a closer look at how a term insurance policy payout works.
How Do You File A Claim With The Insurance Company?
The first step to obtaining a term insurance payout is to file a claim with the insurer. You can do this in any one of three ways, as explained here.
- File a claim online using the insurer’s web portal.
- Contact the insurer over the phone to file your claim.
- Visit the branch office and file a claim in person, by submitting a written request.
What Are The Documents Needed To Obtain Death Benefits?
If you’re the beneficiary of the deceased policyholder, you may need the following documents to substantiate your claim.
- A copy of the death certificate of the deceased person
- A copy of the term insurance policy on which your claim is based
- The claim form provided by the insurer, duly filled in
- Proof of identity and address of the claimant
- Bank details of the applicant
- A legal heir or succession certificate, if needed
- Physician’s statement, employer certificate, or hospital certificate where needed
Types Of Term Insurance Payouts
As established earlier, term insurance premiums vary. Insured individuals are tasked with paying them on a regular basis which may be according to a monthly, quarterly, half-yearly, or annual frequency. Death benefits awarded to the insured individuals’ beneficiaries/nominees may be allocated in a number of ways. The insured individual makes the decision of how they want the payouts to be, when they purchase their term insurance policy.
For the most part, term insurance payouts can be categorized as follows:
1. One-time lump sum pay-out
Should insured individuals avail of this form of a payout, their beneficiaries/ nominees receive all the money owed by the insurance company in a single payment.
2. One-time lump sum payment in addition to fixed monthly pay-outs
Here, the beneficiary/nominee avails part of the sum assured as a single lump-sum payment. Additionally, the insurance company is obligated to give them monthly payments for the next few years or as is dictated by the insured individual when they first purchased the policy. This form of a payment scheme is useful as the beneficiaries/ nominees can use this additional monthly payment to fund their daily expenses.
3. One-time lump sum payment in addition to increasing monthly pay-outs
Under this form of term insurance payout, beneficiaries are entitled to a single lump-sum payment at the time of the insured individual’s death which is the entire sum assured amount. In addition to this, they are paid sums of money that increase with each year that passes for a specified period of time which the insured individual determines at the time of purchasing this form of insurance. Such payouts are subject to policy terms and conditions.
Conclusion
Investing in term insurance can provide you and your loved ones with a financial safety net which is much needed during these challenging and uncertain Covid-19 times. Term insurance plans could provide financial security to one in case any uncertainty were to arise. Remember that a term insurance premium calculator is available freely online that can be used to ascertain an estimated premium one should pay based on their desired sum assured.
Also read- What Is Investing And What Does It Mean? Learn About Several Investment Options.
