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Term life Insurance

When you buy term life insurance, should you opt for staggered payout option?

Term Insurance is known to be the simplest form of life insurance which offers a lump-sum amount to the policy beneficiary as the death benefit, in case of policyholder’s demise. This death benefit amount secures the dependents of the insured financially and enables them to sustain their lives without any hassle.

When you buy term life insurance, should you opt for staggered payout option

People usually opt for a larger sum assured for the benefit of their dependents when they plan to buy term life insurance. But what if the nominee of the policy is not savvy in managing finances? Often it has been seen that family members are usually not proficient in handling such large amount and fail to make the best of it. Therefore, you need to ensure that the funds remain secure.

Due to such possibilities and also with the change in time and requirements, term insurance features have also significantly changed. And owing to these various payout plans have been introduced by the insurers. Staggered payout is one such payment option that is designed to match the needs and requirements of the beneficiary in the absence of the policyholder. Let’s understand each aspect of this payout option through this article so that it gets easier to decide whether to opt for it or not when you buy term life insurance.

What is a staggered payout option?

In a staggered payment option, the policy beneficiary receives one portion of the insurance coverage amount as a lump sum and the remaining amount as monthly or annually for a specific period of time. Under such an arrangement, the nominee can easily plan their budget without thinking about what they will do with the lump sum amount. So even if the lump sum portion gets finished, the regular monthly payments can help the dependents to manage their daily household expenses.

Different types of staggered payout options

  • Monthly income:In this, the remaining amount after the lump sum payout is paid in the form of monthly instalments. Here the amount is fixed for a pre-determined period.
  • Increasing monthly income:This option takes care of the rising inflation rate. Under this payout option, the monthly payout amount gets increased by a certain percentage (10-20 percent) every year. In this way, the dependents of the policyholder can manage the rising expenses.

Valuable pointers that you should remember while choosing the staggered payment option

  • If you are not sure that your dependents can handle the huge amount of death benefit, then you should opt for the staggered payment option.
  • If you don’t have any debts and want a monthly income for your family in your absence, then staggered payment option is ideal for you. But if you plan to buy term life insurance to take care of your loans and liabilities, then no need to go for a staggered payment option. Because in such case the lump sum amount of sum assured is more useful rather than the monthly payment.
  • If you have some financial goals that need to be catered like your children education requires a fixed monthly payment, then staggered payout option is the best option for this purpose.

Deciding the time frame 

Once you have decided to opt for the staggered payment option, then you need to determine the time frame for which you want your nominees to get regular income. This primarily depends on the life stage of the dependent. For instance, if the nominee is young, then a longer duration might be suitable. Additionally, choosing the insurance provider is also an important decision to make, as these plans are not the regular ones. And as not all the insurers offer the same plans, therefore you should select that insurance company which fulfils your duration requirement.

When you plan to buy term life insurance, it is necessary that you carefully look for the right features based on your needs. And make sure you mention the same on your application form. Such as while opting for the staggered payment option, ensure that you specify it correctly in the form.

Whether you opt for a staggered payout option or nor it depends on your requirements.

However, it would be best if you opted for staggered payout considering your family’s immediate requirements. Such as some expense can be related to the deceased hospitalisation bills, then paying off pending liabilities like various loans. If you want to know more about term life insurance with staggered payout option, then visit and speak to insurance experts to get a better understanding of the same.


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