Buying a Term Life Insurance? Look Out for These Claim Settlement Options

Buyers of Term Life Insurance have increased rapidly in present times. It is the least expensive way to purchase a substantial death benefit on a coverage amount. It is to be noted here that no payout is made if the insured survives the tenure. But while buying, the policy buyer may get confused given the multitude of options for settlement of claims.

What should you do to remove confusion so that you take the right buying decision? Consider the following factors to select the best option from amid the multiple options to settle future claims.

1. Lump Sum Payment

Under this option, the insurer pays the entire sum assured to the nominee of the expired policyholder at one go. It is the most popular option for claim settlement when Buying a Term Life Insurance. The nominee can use the sum assured amount the way desired such as prepaying a large loan or meeting other financial liabilities left by the policyholder or of loans taken by the nominee.

As the nominee is at liberty to use the fund, its judicious use is advised. Its misuse will only lead to facing of financial problems by the family. If the policyholder nominates multiple persons, the proportion of fund allocation has to be clearly mentioned to avoid future conflicts.

2. Regular Income

Under the regular income option, the insurer agrees to pay the nominee a sum assured in equal monthly installments over a specific period of time. If the predetermined time is 10 years, the installments will be disbursed equally on a monthly basis over a period of 10 years. As no lump sum payment is made by the insurer, the nominee cannot prepay any large loan liability. Generally, the premium for this option is the cheapest.

3. Blend of Lump Sum and Regular Income

This Term Life Insurance Claim Settlement preference is a combination of the benefits of the aforementioned two options. The nominee gets the benefits of lump sum payment and regular monthly income. The insurer pays part of the sum assured as a lump sum and the balance amount as monthly equal installments over a pre-determined period (generally 10 years).

The nominee gains a competitive advantage of prepaying loan liabilities without worrying about monthly expenses. This Term Insurance Policy also comes with an option of an increased regular income over the period of 10 years.

4. Lump Sum and Regular Income Till Child Attains 21 Years of Age

Individuals with a child can opt for this claim settlement option. It is similar to the third option, the only difference is the disbursement of monthly installment payment needs to be done until the child attains the age of 21 years.

The insurer pays the nominee a sizeable amount as a lump sum and the rest as monthly installments, which can be more or less than 10 years until the child turns 21. The premium for this option depends on the age of the child.

Also Read: Myths About Life Insurance Busted

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