Differences Between Policy Term And Premium Payment Term

Policy term and Premium Payment Term are two important yet different concepts of insurance. However, people tend to confuse between the two terms, and tend to think that these two terms imply the same meaning.

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What is Policy term?

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

What is Premium Paying Term?

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.

Know the differences between Policy Term and Premium Payment Term

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.

Benefits of Term Insurance Plan

Term insurance provide a number of benefits. Some such benefits are as follows:

• Premium of term insurance are affordable, so you can expect high-value cover on life by paying an affordable premium.
• Premiums of term insurance can be paid on monthly, six-monthly or yearly basis.
• In terms of your age, the sooner you start a term plan, the lower the amount of premium you would pay.
• Term policies provide coverage for longer duration. Some term insurance such as whole life insurance offer coverage for the entire life till the age of 99 years.
• Term insurance offer payout of sum insured. So, on account of the unfortunate demise of the insurance policy holder, family members can get the payout of the sum assured.
• Term insurance provide coverage against critical illness. So, you can claim lump sum payout if diagnosed with a critical disease.
• Term insurance also provide benefit in case of accidental death. So, you can get protection against such grave mishap that might occur in future.
• Term insurance also offer coverage against terminal illness. Even in this case you can claim for a lump sum pay out.
• Further, term insurance offer numerous tax benefits for the insured person. These benefits can be claimed under section 80C and more.

Reasons to obtain term insurance

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:

• Longer coverage (up to 99 years)
• Wide ranging coverage against critical illness
• Easy claim of Payouts in case diagnosed with critical illness
• Payout in full in case diagnosed with terminal illness
• Low premium options

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Conclusion 

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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