The limited Premium payment option allows you to pay the premium amount for a shorter time period such as 5, 10, 12, or 15 years and enjoy the benefits of term insurance coverage for a longer time period. You can choose to pay the premiums before the policy term ends.Read more
Limited-term plans provide you the benefit or the option of paying premiums for a limited time period such as 15 years, ensuring that your coverage is increased for longer time periods. However, this doesn’t affect the term coverage period of the insurance plan. In simple words, you will receive the life cover for the whole policy term, irrespective of the premium payment term.
Mr. Rao, a 30 years old male, has purchased a term insurance plan with a policy term of 30 years. He wants to pay his premiums prior to retirement, at 55 years of age. So, if he chooses a limited pay option, then he can opt to pay his premium amounts in the next 15 years.
If you are planning a major shift in your career i.e., from job to business
If you are looking to opt for a sabbatical in future
If you are thinking to buy a whole life cover
The following are the benefits of the limited pay option:
You can get a shorter premium payment term for a longer policy tenure and life coverage. With appropriate planning based on your earnings, you can select the time of payment as long as you are in your employment stage. However, you can increase the policy tenure during your retirement
In various cases, it is quite common that you buy a term insurance plan without any financial planning and fails to pay the premium amount on deadlines throughout the time period. In the case of a limited pay option, the premium payment term is short, and you can reduce the chances of policy lapse easily.
With a term plan with limited pay, the yearly premium for the plan naturally increases. The premium rates are higher for limited pay in comparison to the regular pay option. As the premium gets higher yearly, the tax deduction amount u/s 80C of the Income Tax Act can be increased, allowing for up to 1.5 LPA.
If you are planning to buy a term plan at an early age, the premium will be comparatively less because of the reduced risk of death when you are young Also, the financial commitments are less at this age, so you can contribute a large amount for the term insurance plan.
You can buy and complete all the important payments before getting married and planning other long tenure financial goals. It makes sure that a high life cover amount might help in definite financial planning with sufficient savings and insurance options for your complete life with ease.
A limited pay option is suitable for some specific types of individuals who have:
A short span of career: If you’re an artist or a sportsperson working in the creative industry, the career is usually of short span. Thus, the income that is earned is limited to a specific tenure.
Unpredictable working surroundings: If you’re working with an organization that doesn’t have strong groundwork and cannot survive economic developments in the future.
Business professions: If have just started a new business and the income or earnings are not that consistent
Retirement: If you’re nearing the age of retirement, you can select to pay till the retirement stage and enjoy the benefits throughout life.
Let’s understand this with the help of an example
As discussed limited premium payment option is the best option that lets you remain covered for a longer time, while you pay less amount of premium. It is suitable for those who want to pay the premiums when they are still working and have a regular income source while staying protected even when they retire. The faster you pay the premium amount, the lower the total amount. The limited payment option also offers a discount on the total premium.
As per this table, you are required to pay Rs. 16169 for limited pay for 15 years, whereas Rs. 42259 for 5 years. So, in case of limited pay for 15 years, you are required to pay a lesser premium amount than 5/10 years.
Let’s understand this with the help of the below example:
|Premium Payment Term||Annual Premium||Discount|
|5 years||Rs. 42,259||Save up to 45%|
|10 years||Rs. 22,320||Save up to 40%|
|15 years||Rs. 16,169||Save up to 36%|
|Pay in one go||Rs. 2,25,759|
|Rs. 1 Crore Term insurance premium amount for a 32-year-old non-smoker male.|
Term plans have become a necessity concerning unpredictable life events. You should plan for the purchase at an early age to protect the financial needs of your family. However, you have the option to choose the product at your convenience. The limited pay term insurance plan is one such option.
Also, you have the facility to get all the insurance benefits during the policy tenure. Choose the best insurance company with a good claim settlement ratio. With limited plans, you can enjoy a larger risk coverage while paying for a short time.
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