How to Ensure a Regular Income Stream for Your Family?

As the primary caretaker of the family’s income, you also bear the responsibility of ensuring income/continuity for your family. Expecting your dependents to take up the reins of your financial acumen right after your sudden demise could be unrealistic.

Even with good passive income, your dependents will need time and support to come to terms with the new reality. The usual misfortune families suffer after the sudden demise of the breadwinner is the magnitude of long-term financial decisions. Suddenly, they come face-to-face with the responsibilities you had so efficiently carried. 

Term insurance plans generally offer the flexibility to choose the way you want the benefits to be paid out. One such option is a monthly income or a part lump-sum, part monthly income payout of benefits. Choosing a regular payout option will create a monthly income stream for your family.

As a wise caretaker, you would want your family’s regular income to be a safe stream. So, how do you ensure that the monthly income stream keeps on trickling?

• Get Adequate Health Cover

Health insurance can support you financially in case of sudden hospitalisation. Adequate health cover means that the benefit amount of the cover is large enough to allow the best medical care for you and all your family members. Yet, at the same time, the cover should be:
• Affordable for you
• Should keep up with inflation
You will need two kinds of health covers for your family. One is the Mediclaim insurance, which takes care of hospital bills directly. The other health insurance protects you financially against dreaded diseases, which are unpredictable and can be financially devastating.

• What If You Already Have Health Insurance?
  If you already have health insurance, all you need to do is check the following:
  • Is the coverage adequate?
  • Does it cover your spouse and child?
  • Do your parents have adequate health cover?

If your existing health cover is low, you should try and secure a higher sum insured under the plan. While you can increase the cover under Mediclaim insurance with critical health cover, you will need to buy another policy. You can also add new family members to your existing Mediclaim insurance plan.

The profession, employment or business is often the primary forte of one family member, also considered the primary breadwinner for the family. So, if you are the primary breadwinner for your family, how do you ensure that the family has a source of income even when you are not there?

One of the ways is buying a term insurance cover for the family. In case of your untimely death, your family can receive a large sum of money. They can use this money to generate a monthly income as well as to meet their future financial goals.

However, the two challenges of investing the money in a safe instrument and tax will remain. Also, your dependents must be prudent about dividing the large sum for income and future goals.

Buying Term Life Insurance with Regular Income Option

Term insurance with a regular income option means you can decide to pay the benefit amount to your family as a monthly income. This is opposed to the usual lump sum only payout from term insurance policies.

With this option, your family can receive two different pools of money:

• Lump-sum amount to help pay off any debts and invest in the big future goals

• Another part is converted to a monthly income for the remaining policy tenure

With this option, you can completely eliminate the need for your dependents to invest the insurance proceeds for household needs. Instead, they can focus on their future and living debt-free.

Life insurers are renowned for their long-term safe investment options. After the sovereign government, life insurance companies are the only asset managers promising a guaranteed return on a 20-year investment plan.

Also, since this income is a direct payout from a life insurance policy, it is not taxable under section 10(10D) of the Income Tax Act, 1961. You can choose to make this income grow over the years by a percentage of the initial payout.

This way, the income keeps growing for the family, and they can maintain their lifestyle in the long run.

For example, with the iSelect Smart360 Term Plan byCanara HSBC Life Insurance, you can choose a level family income or opt for a 5-10% growth that will be payable for 4 years.. So, if your family starts to receive an income of ₹ 50,000 per month, it will keep growing by ₹ 2500 - ₹ 5000 every year for 4 years.

Thus, if you are salaried or have a business, the simplest way to ensure the long-term safety of your income to your family is with a regular income option of term insurance.

Conclusion

Choosing a term insurance plan with a regular income option ensures that your family receives a stable and tax-free income stream even in your absence. This approach reduces financial stress, eliminates the burden of investment decisions, and supports both daily needs and long-term planning with ease.