In term insurance, a pre-determined amount of money is paid to the nominee on demise of life assured during the policy period. But there is a growing realisation that most individuals may not make rational decisions about money in the trauma and grief of losing a loved one.

There can be a crowd of financial advisors who may be greedy and unscrupulous. So insurance companies are bringing out life insurance plans with an annuity-based payment option.

At present, companies like Aviva and Max Life Insurance have term plans that fulfil the requirement of deferred payment. Each of these plans has features to stagger the sum assured and offer regular payment.

Take the i-Life Secure Term Plan from Aviva India. Only 10 per cent of the sum assured is given on death and the balance is paid as yearly installments of 6 per cent each over the next 15 years.

For example, if the individual chooses to take a cover of ₹1 crore, the family will get ₹10 lakh on death and ₹6 lakh every year for the next 15 years.

The Max Life Online Term Plan offers two payment options besides the basic life cover plan. These are the monthly income and the increasing monthly income option. In both cases, the nominee is paid a certain sum on death and then given a monthly payment for the next 10 years. The increasing monthly option takes inflation into provision and increases the monthly income by 10 per cent every year.

These plans win hands down when compared to normal terms plans now. In terms of cost, they are slightly, if not less expensive than a basic term plan. Also, the monthly or annual income received from the insurance company will be tax-free. While one may argue that the lump-sum payment from a term plan is also tax-free, from a larger perspective, the income generated from investing that money is liable for taxation.

The writer is CEO & Co-Founder, Policybazaar.com

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