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Life Indemnity - Income In lieu Of A Lump Sum
When we think of life indemnity we tend to focus on lump sum cash payments upon the death of the insured. Are you aware that there are alternatives? Did you know that the proceeds of your policy can be distributed in income form instead of a lump sum? Would you prefer to have payments to your loved ones produced in the form of an income?
I have seen lump sum life insurance payments to beneficiaries put to good use but I also have seen situations where this large payment upon death serves no worthwhile function. It is blown in a very short period of time and in some cases the family is left destitute.
The intent through the purchaser of a life policy is more often than not to warrantee the financial security of loved ones. The best way to achieve this is to provide income instead of a lump sum where feasible.
Let us take the husband, for example, who purchases life insurance to guarantee that his family is secure in the event of his premature death. He calculates carefully the amount of indemnity required to ensure this. In some cases the wife is very well certified in the handling of large sums of money but in other cases she has no clue. The husband dies and $1,000,000 or $2,000,000 is put into her hands. When she is adept with money the family is okay.
Let us suppose the proceeds are paid in income form, there are several options to choose from.
Life Income
One of the best options to choose is to have the lump sum distributed in the form of a life income. When the face amount of the policy is sufficient to provide an income that the family can live on this may be a great option to choose. There is, however, one drawback, once the beneficiary dies the income stops...
Aware of this problem life insurance companies created pay out options that would warranty payment even when the beneficiary died. You can choose a guaranteed period of 10 years, 15 years or 20 years for example. Let us suppose you decide to pay your family a life income of $12,000 per month and you name your wife as beneficiary and the children as contingent beneficiaries. After you wife gets the income for say 10 years she dies. The children, who may be in college at this time, are still in want of some financial assistance. The income will continue after the death of the wife for an excess 10 years...a total of 20 years income.
If a life income is chosen the amount paid out is considerably more than had it been paid in one lump sum. Another great advantage is that the primary beneficiary, your wife, cannot outlive this income even when she lives to age 100.
Fixed Amount Option
Let us suppose you decide that you hope your family to have an income of a fixed amount provided by your life indemnity policy. You want them to be paid $10,000 per month for as long a period as the principal will allow. You can also decide to pay the proceeds in this manner.
Fixed Period Option
You have the option of saying to the insurance company "pay my beneficiary an even amount over a 15 year period". This income would be estimated by the life insurance and paid out accordingly. This is pretty similar to the "fixed amount option" in the amount that would be paid out.
Interest Option
If the principal is large enough to provide sufficient income to maintain the family this is a great option to choose. The insurance company will pay the interest each month or in whatever manner you choose. The principal remains in tact...
Let us suppose you wanted your life insurance to provide an income for your wife although she is alive but upon death you hope the face amount of your policy to be paid to your children. This can also be arranged.
Sometimes large sums of money in the hands of a person not accustomed to it can go down the drain pretty quickly. As you can see whenever the income options of your life insurance policies are set up correctly you family can gain much but above all they will be more secure.
Author Resource:-
Uchenna Ani-Okoye is an internet marketing advisor
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