What Is Term Insurance with Limited Pay Option – A Detailed Guide

Term Insurance with Limited Premium Pay Option – Know Everything

Wondering, what is term insurance with limited pay option? Term insurance plans offer adequate financial support to customers so they can cope with various unanticipated situations. In this steep competitive era, insurance companies offer customized term plans based on the requirements of the customers. A person is free to choose a term plan with respect to the sum assured, policy tenure, and premium flexibility options.

While selecting a term insurance plan, the mode of premium plays an imperative role in your purchase decision. A customer can go for either regular or limited premium payment term insurance plans as per their financial stability.

In this post, we discuss some term insurance with limited pay option so that customers can take an informed purchase decision.

What is a Term Insurance?

A term insurance plan is a conventional life insurance policy that offers financial protection and coverage to policyholders. In case of the sudden demise of the policyholder (during the policy tenure), the beneficiary receives the sum assured amount from the insurer. As a policyholder, you are free to pay the premiums as per your income level and comfort.

What are Limited Premium Payment Term Insurance Plans?

In a limited premium payment term, you need to make recurring payments for a pre-defined limited period. The duration is lesser than that of a normal term plan. The prime advantage of the limited pay premium payment option is that you get coverage throughout the policy tenure period.

Animesh purchased a limited-term insurance cover for 30 years to enhance the financial security of his family. He is employed with a reputed MNC and earns a handsome salary every month. So he decided to clear all due payments within 20 years from the beginning of the plan. In this scenario, even though Animesh will pay the premium for 20 years, he would actually enjoy coverage for 30 years (throughout the policy tenure).

Limited Period Premium vs Yearly Payment in Term Insurance

While purchasing limited premium payment term insurance plans, you can pay all your future premiums within a specific period. This means that you can clear all your premiums before the policy tenure.

However, in an yearly payment option, you would need to pay your premiums annually to enjoy coverage. In case of any failure in payment, your policy would lapse and you may not enjoy the benefits of the coverage plan.

Who is Most Suitable for Limited Pay Term Insurance Plans?

The following people are believed to be the best suited for limited pay term insurance policy:

1. Those with short lived career options: If you’re associated with the sports or film industry where your career is short-lived, you can go for limited payment term insurance plans. In these professions, you earn money only for a restricted period so it makes sense to buy such a policy.
2. Those in an ever-changing working environment: If you’re associated with a company that does not have a strong foundation, you should opt for limited pay term insurance plans since your company may not be able to withstand the volatile changes in the market.
3. Business associates: If you’re running a business, it’s a good idea to choose a limited pay term insurance plan since income is not always steady.
4. Those who are or about to retire: If you’re on the verge of retirement, you can choose this plan to pay all premiums before you retire. This way, you can enjoy the benefits and coverage of the plan throughout your life.

Top 4 Benefits of a Limited Premium Payment Term Plan

Here are some of the benefits of the best term insurance policy in India – limited premium payment plans:

1. Smaller Payment Period 

The prime advantage of a limited pay term life plan is that you can enjoy the coverage throughout your life even by paying premiums for shorter durations. Based on your income and expenses, you’re free to choose the payment period. You may also try to finish all your due payments within your employment phase and still enjoy coverage in your retired life. Under this type of policy, the burden of paying premiums is decided for a specific period and you may customize the duration at your convenience.

2. Minimum Chance of Policy Lapse

Very often people purchase a term insurance plan without proper planning. In some cases, they may fail to pay premiums during the difficult phases of life. As such, their policy tends to lapse and they may not be able to enjoy coverage of the plan. However, in case of a limited payment term plan, your premium payment duration is short. This minimizes the chances of inconsistency in payment, allowing you to enjoy all the benefits of the plan.

3. Maximum Tax Benefits

When you opt for a limited payment term plan, your annual premium amount increases automatically. Your premiums will be on the higher side as compared to the regular pay option. However, the good news is that since you’re paying higher premiums, the amount of income tax deduction will also increase. You can save up to at least Rs 1.5 lakhs per year.

4. Higher Sum Assured

It’s always a good idea to buy a term insurance plan when you’re younger. Your premium amount will be less since death risk is minimal. You may not have many financial burdens at this age so you can comfortably pay higher premium amounts for the term duration. This also means that by making a definite financial plan with adequate insurance cover, you can go for a higher sum assured amount to secure your future.

A term plan is the best way to safeguard the financial security of your loved ones. But if you want to choose a term plan at your convenience, go for a limited payment plan. By paying premiums for a limited period, you can enjoy cover benefits throughout your life. Many companies offer limited pay term plans to their potential customers allowing them to pick the best plan by comparing all the available options.