by Mr. SANJAY TRIPATHY, HDFC Life
Protection plans launched so far in the
country have focused on covering immediate liabilities by paying a lumpsum to
the family, and not on how this can be used by the policyholder’s family.
But recently, certain insurers have
attempted to address this problem by offering protection products with
staggered payouts at monthly or annual frequency over a few years.
In small amounts..!
Let’s explain staggered payouts with an
example. Say, Mr. Verma, a 35-year-old with an annual income of RS. 8 lakh, has taken a pure protection plan
for 15 years.
Under the plan, his/her family will receive
Rs. 1 crore in case of his demise. If this happens, Mr Verma’s family will
receive a huge inflow compared to his annual income.
Given the trauma the family is going
through, this will add to the burden due to the immediate financial
responsibility of managing this large amount, so that it generates enough
return to support the family’s financial goals and daily expenses.
Families may be misled in such situations,
by financial advisors, opportunistic relatives or / friends.
On the other hand, say Mr. Verma buys a pure
protection plan of the same value which offers 10% of the cover value — that
is, Rs. 10 lakh - paid upfront for immediate consumption. Thereafter, the
policy will give staggered payouts of 0.5% of the cover value — Rs. 50,000 a
month for the next 15 years.
Such a system will make it far easier for
the family to meet expenses and goals, with enough time to carefully chart out
an investment plan.
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| Mr. SANJAY TRIPATHY, HDFC Life |
The lumpsum, while it can be invested, may
not necessarily provide such regular income, more so since staggered payments
commence immediately.
Benefits..!
The lumpsum & monthly income received
from the insurance company will be tax-free.
What’s more, the premium amount that has to
be paid will be lower than the standard policies that pay lumpsum benefits.
There are also variations that insurers are
coming up with. For instance, the policyholder can choose for an increasing
payout option where the monthly payout increases by 5% to 10% each year to deal
with inflation.
About the author..!
About the author..!
The writer is Mr. Sanjay Tripathy Sr. EVP - Marketing, Product, Digital and E – Commerce at HDFC Life
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