5 min read
Updated on Apr 27, 2023
Policy term is the period or duration of time for which the term insurance policy of an insured person stays active.
Every term insurance policy insures a policy owner for a particular period of time. This tenure is known as the policy term. The policy remains active during the tenure of the plan provided the policy owner makes timely payment of the policy premium. Thus, policy term can be called as the lifetime of a term insurance.
Also Read: Term Insurance Premium vs. Health Insurance Premium
On the other hand, Premium paying term is the number of total years for which the policyholder must pay the insurance premium. These days, insurance companies present many lucrative and flexible choices for making it easy for the policy holders to make payments as per their comfort. So, despite the active period of the policy, you might have to pay the premium as per the tenure determined by your insurance term policy provider.
Here are the significant differences between policy term and premium paying term. Policy term is a simple term that refers to the duration for which a policy stays active . However, many people get confused between policy term and premium paying term.
Though both terms are related closely and both denotes time, there is a noticeable difference between the two. This difference makes them apart from each other and not interchangeable.
Policy term signifies the period of time for which a term insurance policy stays active, while the premium paying term refers to the period within which the insurance policy owner has to pay the premiums for the term insurance plan.
Policy term is fixed at the time when you purchase your insurance plan. You can discuss with your insurance provider before fixing the policy term. Policy term also specifies the period during which the insured person is assured of a definite coverage by the insurance company.
Premium paying plan refers to a different concept. It is the tenure during which the policy owner has to pay the premium amount to the policy provider. In many cases the premium paying term is almost equal to the policy term, which is why people easily get confused about the two terms. However, many insurance providers offer shorter premium paying term for many term policies. Thus, depending on the insurance company, you can have the premium paying term shorter or equal to the policy term.
For instance, suppose you bought a term insurance policy with a coverage period of 50 years. This means that your policy term duration is 50 years, which means that your policy stays active for a period of 50 years. However, as per the rules of the insurance company, you might be allowed by the insurance provider to pay off the premium of your term plan within the tenure of 25 years. Now, in this case, the premium paying term of the policy will be 25 years.
Also Read: How To Compare The Best Online Term Insurance Plan?
Now that you are clear about Policy Term meaning and also about Premium Payment Term, let’s discuss some of the benefits of having a term insurance plan.
Term insurance provide a number of benefits. Some such benefits are as follows:
Term insurance provide financial security for the whole family in the event of an unfortunate demise of the policy owner. Here are the reasons why you should go for a term insurance:
It is very important for everyone to buy an appropriate term insurance plan from the best insurance company. Likewise, it is also important to have a good understanding of the policy term meaning and buy an appropriate term policy that would suit you and the beneficiaries after you. Hence, to maximize the benefits that can be availed from your term insurance plan, you must ensure to align your policy term with your age, life target, liabilities and so on.
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By Premium paying term it means the total number of years that a policyholder has to pay the premium for a term life insurance. These days, there is lot of flexibility offered by insurance companies in terms of options that they can use to make the payment.
By Policy term it means the duration for which a term insurance policy remains active. This term or duration is fixed between the insurer and the insured at the time of purchasing the insurance plan. Thus, it is period during which the insured will receive guaranteed cover by the insurer.
Policy term is the lifetime (duration) of your term insurance. On the other hand, Premium payment term it means the number of years that a policyholder is required to pay the premium for his/her policy.
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