If You Have A Loan, You Cannot Miss Having A Term Plan

Jun 11, 2018 | 1 year ago | Read Time: 2 minutes | By iKnowledge Team

Picture this scenario. You buy a home for your family by availing of a home loan. You start repaying the amount in EMIs, but something unfortunate happens and you are unable to repay the amount anymore. Now, your family begins to suffer the repercussions. But, you have the option of avoiding this scenario completely.

To ensure that your EMIs are paid on time, a backup plan needs to be in place, in your absence, like an equivalent insurance cover against the loan you avail. Since an insurance policy — like term insurance — provides security to your family in case of an unfortunate event at a minimal cost, it is an ideal plan to seek.

When you look for a term insurance plan, you must understand its multiple pay-out options of the sum assured. You can opt for a lump sum amount that is paid all at once, or you can choose staggered pay-outs, which is an amount that is given to your beneficiary at regular intervals. This can act as a payment replacement for your family.

Depending on the type of loan you wish to avail, you also have the option of choosing pay-out options.

If you have a home loan

Securing your home loan with an insurance cover is as important as paying the EMIs on time. If the loan amount is high, you should opt for a lump sum pay-out.

If you have an education loan

Since loan and EMI amounts are comparatively smaller than home loans, you can opt for a monthly income option. This will help your family pay EMIs regularly without impacting their monthly budgets.

If you have a personal loan

Personal loans usually have smaller repayment tenures. You can choose a payout option that suits you best according to the amount of your loan and its duration.

If you have a car/bike loan

Bike loans are smaller than car loans, so you can choose regular income payouts to cover the EMIs. Because of the higher car loan amount, the payout option that you choose can be a combination of a lump sum plus and regular income pay-out. A 30-50% of sum assured may work as the lump sum amount.

If you travel via a bike, you can opt for an accidental death benefit rider. With this, the pay-out will provide enough cover for your loan and also let your family have sufficient funds after the loan is paid off.

Married Women’s Property Act

If you are married and have any type of loan that you are repaying, taking term insurance under the MWP Act will be a smart choice. It prevents frauds from making unlawful claims to the claim amount. This is readily available and can be applied online on the insurer’s website.

Buying term insurance and the choice of payout option will determine the future of your loved ones. In your absence, it can help your family meet their daily expenses and repay the loan and at the same time manage their future expenses with the lump sum amount.

Advt. no: IA/May 2018/4028

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