Behind the appeal of a lump sum insurance payment lies a harsh reality: many families struggle to manage it wisely and often exhaust it too quickly. Aditya Birla Sun Life Insurance (ABSLI) and Policybazaar aim to change that with their new ABSLI Income Suraksha Plan, which offers a fixed monthly income to beneficiaries instead of a lump sum payment. But is this a smarter option or are you sacrificing long-term gains for short-term convenience?
Monthly Income vs. Single Income: What’s New?
The Suraksha Income Plan is different in that it provides beneficiaries with a monthly income rather than a lump sum. For example, if a 30-year-old policyholder purchases a 40-year-old policy, the beneficiary will receive a monthly income. term insurance and dies at age 35, the family will continue to receive monthly payments for the remaining 35 years of the policy term.
However, even if there are only a few years left on the policy, the plan guarantees at least 10 years of monthly payments. So, even if the insured dies at age 65, when there are only five years left on the policy, the family will receive monthly payments for the next 10 years.
“We have observed that people who receive the death benefit prefer to remain silent about it because of the risk of fraud. They also do not disclose it to their family members, making it difficult for them to get the right advice on how to manage the lump sum death benefit,” explains Rhishabh Garg, Head of Term Insurance Business Unit, Policybazaar.com.
“The amount may be exhausted much earlier than it should be. Even well-educated beneficiaries may not have enough financial knowledge to manage it and make it last longer. This scheme can help such families. Take advantage of it if your beneficiaries are not financially literate,” he added.
The Suraksha Income Plan offers two payment options:
Fixed monthly income
Inflation-adjusted earnings (with a higher premium).
For example, a 35-year-old man who selects a monthly income of ₹1 lakh with a policy term and premium payment term of 30 years would pay an annual premium of ₹20,760. The sum insured would be 120 times the monthly income, which is equivalent to ₹1.2 crore. Opting for the inflation-adjusted income option would increase the premium to ₹30,000 per year. It should be noted that income payments are tax-exempt.
Salaried employees are entitled to a 7% discount on their first year’s premium, and an additional 2% discount is offered to female customers.
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Pure Term Insurance vs Suraksha Income Insurance: What is the trade-off?
Abhishek Kumar, a investment advisorKumar, a registered Securities and Exchange Board of India and founder of SahajMoney, conducted a comparison between the Suraksha Income Plan and a traditional term insurance policy. According to Kumar’s analysis, a 35-year-old person buying the Suraksha Income Plan with a 35-year term policy would pay an annual premium of ₹24,000 for an insured sum of ₹1.2 million rupees and a monthly payment of ₹1 lakh.
If the insured dies at age 50, the family would receive a monthly income for 20 years, for a total of ₹2.4 crore. However, Kumar points out that the same premium could buy a pure term life insurance plan with a higher sum assured. ₹1.5 crore. If beneficiaries invest the lump sum and manage to generate a tax-free return of 8%, they could sustain the monthly income for much longer, potentially exceeding the ₹2.4 crore provided under Suraksha Income Scheme.
“If they are not sophisticated enough, then the policyholder can consider buying this policy (Suraksha Income Plan) so that his dependent can receive a monthly payout till the age of 70,” says Kumar.
Mint carry
The ABSLI Income Suraksha plan presents a practical solution for families who may find it difficult to manage large one-time payments. However, it comes at a cost. While the plan guarantees regular income, it may not offer the highest potential earnings compared to a traditional term plan with greater coverage and investment options.
Ultimately, the choice comes down to financial literacy and beneficiary preferences. For families lacking financial knowledge, the Income Suraksha Plan could offer peace of mind. But for those who are confident in investment management, a fixed-term plan may be more cost-effective.
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