We all put in long hours at the office in order to advance in our careers, increase our take-home pay, and accumulate a larger nest egg for our loved ones. Protecting your family's financial well-being while you're away is made possible with the help of salary protection insurance, also known as income protection insurance.
In addition to a lump-sum payment, this type of term insurance coverage usually offers a regular income payout option. At the time of purchase, the policyholder will have the option of dividing the total value assured between regular income and a lump payout.
As a result, anyone who is considering purchasing this insurance should be aware that it is a term policy that does not provide any benefits at the end of the term period. An assured death benefit (a one-time payment) will be provided to the nominee if the policyholder is no longer alive.
It works like this:
Take a look at yourself as a potential buyer of the term insurance policy for income protection. Choosing a monthly income for your family member after your death is an option that must be made at the time of purchase. Your monthly take-home pay may be less than this, or it may be the same.
After that, you'll need to decide on a policy and a payment schedule. For example, you can get a 15-year coverage for a regular premium payment term at the age of 30 (for nonsmokers).
The insurer will determine the percentage increase in the monthly income that the policyholder selects. It's possible that the insurance company will provide a 6% annual compounded rise on this revenue, which would mean that the monthly premium would be 106% the previous year's income each policy year.
Let's look at an example to better understand:
So, let's take the Rs. 50,000 monthly salary as an example. It will rise to Rs 53,000 a month in the second year, then to Rs 56,180 the following year, and so on.
Suppose the policyholder dies on the first day of the fifth year of the policy term. The nominee would receive Rs 7.6 lakh in death benefits and an additional Rs 63,124 in monthly income as a result of this plan. (12 times the higher monthly income in the fifth policy year) X 63,124 = Rs 757,488 (assured death benefit).
As long as the insurer's terms and conditions are met, they will continue to pay them the monthly benefit.
One must be careful, however, because insurers might also market other types of life insurance policies under the label of salary protection.
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