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There is no guarantee of safety tomorrow. But the instability of the future must not come in the way of our basic needs and necessities. Income Replacement Plan is what takes responsibility for it. It is a conducive means to help your family or nominee during financial emergencies.

Such a plan is brought to action when the policyholder meets an uncertain accident, injury or death. Let’s learn about this plan in depth below!

What Is an Income Replacement Term Insurance Plan?


Income Replacement Term Insurance Plan is simply Term Insurance with monthly benefits to the family. As the name indicates, this type of Term Insurance guarantees the replacement of income that was earned by the policyholder. Such action will occur only when the policyholder is no longer in the financial position to help their nominee or family. Such a case could be a cause of the policyholder’s injury, accident or untimely death. 

How Can Income Replacement Term Insurance Plans Help Your Family?


During an uncertain turn of events, there is always a stringent need to live up to the emergencies. When the demise of a bread-earning member of the family occurs, it can have a major impact on the financial status of the family. Thus, an Income Replacement Term Insurance Plan helps them by providing a fixed income every month. This acts as a lifesaver for those dependents who can run their household without facing much hassle. It also gives them enough time to map out the different ways that they can apply to earn money once the period of this plan is over.

Some of The Important Features To Consider While Opting For This Plan?


  • Age plays a massive role while deciding upon the premium of the policyholder. 
  • The sooner you opt for a premium plan, the better you are likely to receive and at most affordable rates that can deliver the utmost convenience. 
  • Except for when the contract is withdrawn, the premium amount remains the same throughout. 
  • Most policy terms exist between 15 to 20 years. However, for people who would want to opt for a larger plan, it can increase to 65-70 years. 

The Income Replacement Policies fail to hold its effectiveness when the policyholder expects high returns.

What Are The Benefits of Income Replacement Term Insurance Plans?


  • Inexpensive - Income Replacement Investment Plans guarantee a good amount of fixed income that can be provided to the family timely as long as the tenure prevails. Such a massive responsibility is adopted by the insurers at a minimal rate. The inexpensive side of this plan is what drives people towards opting for it instantly. 
  • Minimal Risk - As Income Replacement schemes provide very little risk, they are highly demanded by those who want to protect their family financially during uncertain times. 
  • Plenty of Time To Plan and Decide - As the Income Replacement Investment Plan provides a good long tenure to cover the finances of the family or nominee, it gives them enough time to map out various strategies to find a stable source of income once the tenure is over. 
  • Financial Security - There is umpteen financial security provided via this plan. As it promises to offer fixed income on a monthly basis to the family, the nominee continues to live tension free in terms of financial needs. 

Read: Term + Ulip Combo For Optimal Returns, Risk and Tax Savings

 What Are The Limitations of The Income Replacement Insurance Plan?


  • Unlike the Term Insurance plan which provides in totality, the Income Replacement Insurance Plan continues to provide the income monthly until the tenure is over. Sometimes, this long process might be a bit difficult to comprehend for the family of the policyholder.
  • Since regular insurance plans are a one-time cover, they are far easier to understand. Again here, the Income Replacement Plan is comparatively tougher to crack due to the monthly investments that are covered by it.
  • Since there are innumerable products within the plan, the buyer is most likely to feel confused and opt for something that’s more convenient. 

Difference Between Lump Sum Money and Income Replacement Plan?



Lump Sum Money - While lump sum money together might seem like a long pause from financial problems, it might not be the best way to deal with the financial crisis. Having lump sum money can make it risky to store it properly in a safe place, which might put you at a great worry. More so, it might become difficult to manage and make regular savings. 

Income Replacement Plan - Contrary to lump sum payments, an income replacement plan allows you to receive a fixed amount every month. This will not only solve the problem of managing the finances but also store it at home without a second thought. 

When Should You Buy an Income Replacement Plan?


  • When you are the only source of income for your family, it might be a great idea to invest in this plan to safeguard your family’s financial future. 
  • If your family has failed to acquire a comprehensive education, they might not be able to look after their personal finance even after your unfortunate death. At this point, an Income Replacement Plan can help by covering the finances each month. 
  • In case the dependents are unable to manage lump sum money together, this is the best means to help them. 
  • In case the dependents lack the basic knowledge of spending finances properly, this plan could guide them without any hassle. 
  • Monthly payments can help the dependents handle the monthly expenses that can provide them with timely financial security. 

Important: Online Term Insurance for Senior Citizen

What Is a Customized Income Replacement Term Insurance Plan?


Customized Income Replacement Term Insurance Plans deals with the personalization of the Income replacement in accordance with your preference. This means that you can opt for a method where you can even pay a lump sum to your family during a specific period of time and later continue to pay the fixed income in monthly instalments too. Thus, this can render you with the utmost convenience and your family members when in financially urgent times. 

To Sum It Up...

Income Replacement Plan could be a great choice when in need of financial assistance for eventualities. Make sure you opt for your insurance plan at the earliest to enjoy its various benefits. In case of any queries, do resolve them with the assistance of an insurer or someone who has already had the experience of using this type of plan. Good luck!

Naval Goel is the founder of PolicyX.com. He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.
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