Term Insurance with Limited Pay

Term Insurance plans helps you in providing financial security to deal with unfortunate situations. The agreement between the insurer and life assured stands on few T&Cs. The selection of mode of premium payment is one of the important decisions that policyholder makes as per their convenience. Ideally, there are regular and limited premium payment options available for the insured.

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Let’s discuss them in detail: 

What is Term Insurance? 

Term Insurance is a pure life protection plan that offers a substantial amount of coverage at lower premium rates. It is a valuable investment for the security of your family members against the financial burdens in the absence of the person who is the sole earning member of the family. In case of premature death, the term insurance plan pays the sum assured to the family during the policy tenure. Moreover, it helps your family to meet their daily expenses in case of emergencies as well as they can save for future responsibilities along with receiving the death benefit. The Higher the sum assured, the higher is the death benefit, and therefore the pay-outs from your term plans provide financial protection to your loved ones. 

Nowadays, customers focus on a product or services that are customized to their requirements. Every individual is looking out to purchase insurance that offers premiums, terms, features, sum assured, and coverage, as per their custom needs. A plan that fulfills all your requirements as per your preferences is Limited Pay Term Plan. 

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What Is Limited Pay Term Insurance? 

Limited Pay Term Insurance Plan is an independent protection plan that offers you the benefit of paying a premium amount for a limited time. This plan ensures that you are covered for a longer period, even in a case when you stop paying your regular premiums. One of the major advantages of this plan is limited premiums and continuous coverage. 

For example: 

Kamal buys a limited-term insurance cover for 20 years. As he is earning well these days, he wants to pay all due payments within 10 years from the starting of the plan. In such a situation, the premium amount will be paid by Kamal in the 10 years, while the cover will last for 20 years i.e., the entire term policy duration. 

Let’s discuss in detail about Limited pay till 5, 10, and 60 years: 

  1. Limited Pay Till 5 

    In this, the premium payment term is less than the policy term but does not involve the option of a single premium. Every life insurance policy might provide you with some premium payment term options under this scheme such as 5 years, 10 years, and 15 years. The shorter your PPT, the more the premium will be. 

  2. Limited Pay Till 10 

    In Limited Pay till 10 life insurance, the life assured have to pay a premium amount in the first 10 years of ownership of the policy, but the advantages last for life. For instance, Ram, 40 years old buys a term insurance cover for 20 years with an option of limited payment. He is expecting to get retire at 55 years and wants to pay off all his premium dues in 10 years from now. In such cases, Ram will be responsible for paying amounts of a premium only till 50. After which Ram does not have to pay anything. However, the coverage will continue for 20 years. 

  3. Limited Pay Till 60

    Limited pay Term insurance plans offer you the chance to pay premiums only for a limited period. However, one still be covered for a long time after not paying limited-term premiums. In limited pay till 60, if you buy limited-term life insurance for 80 years but choose to pay only for 60 years. In such a case, you are required to pay a premium for 60 years, but the insurance coverage will be stretched up to the age of 80 years. This simply means that you do not have to pay any amount for the rest of 20 years. 

    Limited Pay Term Insurance Plan is specifically beneficial for those having varying financial situations, a changeable working environment, flexible income or salary, and are near to the age of retirement. 

Who Should Buy Limited Pay Term Insurance Plan? 

These plans are ideal for people who are very much unsure about their ability to pay a premium for the longer duration or the entire policy duration. These individuals want the life cover to continue for a long but may not have the extra amount to pay the premiums in the later stages. Limited Pay Term is beneficial for those individuals who have unstable monetary states, changeable working environments, flexible pay, or are at retiring age. 

Benefits Of Limited Pay Term Insurance Plan 

As we have studied what is Limited payment in the above section, now let’s learn about its benefits. Limited premium payment insurance plan releases the financial stress of paying premiums for a longer time. This plan provides you an option to choose a longer coverage time as per your requirements. With the availability of a number of plans, one should always be aware of the features and benefits of the plan before buying any policy. This decreases the problem which you might face at a later stage. Let understand the benefits:  

  • Shorter Premium Term – This is one of the primary benefits of limited pay term insurance that it does not require you to pay for longer periods. It offers the payment options for limited, and a pre-decided tenure option is also available under this plan. The plan will run longer than the tenure you chose to pay premiums and will continue to offer coverage throughout the policy. This plan is an ideal option for those who want to spend their retirement years without any financial burden and stress. 

  • Decreases The Chances Of Relapsing Of Policy – Limited pay term insurance reduces the chances of policy relapse because the premiums are payable for a limited duration and you are not required to pay premiums on time for a longer period. The premium amount is paid earlier, so the possibility of relapsing of policy also decreases. 

  • Tax Benefits – Another amazing benefit of limited pay term insurance is that it offers tax benefits under section 80C of the Income Tax Act 1961. The premiums of a limited plan are higher than the regular term insurance plan that resulting in maximized deductions i.e., up to 1.5 lakhs from the taxable income of the policyholder. 

    **Tax Benefit is subject to changes in tax laws

  • Ideal For Individuals Looking for A Short Career - Most of the individuals are currently working under the freelancing work culture whose life span is not that much great. So those people are more comfortable with a limited premium payment option instead of a regular premium plan. Because a regular plan is a long-term premium assurance.  

  • Do Not Miss Installments – If the premium term is low, then the risk of missing any installments is also less. As it has been already stated that it decreases the chance of policy relapse, thus preventing your loved ones from losing the benefits.

Limited Pay Vs Regular Pay Term Insurance

As you know there are two option to pay premium: Limited pay and Regular pay. When you select limited pay vs regular pay term insurance options, it is important to determine the benefits specific to your requirements. Let’s discuss the comparison between the limited pay and regular pay to have a detailed understanding: 

Limited Pay Regular Pay
Flexibility to pay a premium for a limited period  You can pay a premium throughout the policy tenure 
Life coverage lasts for the whole policy tenure, nonetheless the duration of premium payment  Life coverage lasts for the equivalent time as the period of premium payment 
The amount of premium may be higher since it is limited to a small duration  The amount of premium is distributed over the policy term, making them lower.
The policy lapse chances are low since premium amounts are payable only for a particular duration The policy lapse chances are high since the premium amounts are payable for a more extended duration 
Payments end within a specified period and do not extend past retirement  Expenses can also 
Limited dues help life assured to profit maximum possible coverage Regular dues which are increasing with age, constrict the coverage due to the continued financial stress
Tax savings benefit can be maximized u/s 80C of the Income Tax Act, 1961 since the premium is higher  Tax savings benefits are distributed across the years of policy tenure and only offer limited deductions 

**All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C apply.

Why Limited Pay Term Insurance Plan Is Considered Over Regular Pay Term Plan? 

Limited Pay term plan has a well-defined and shorter premium paying term whereas regular has a long premium payment, covering the entire policy duration. The chances of policy relapse are lesser in limited pay term insurance in comparison to regular pay. In regular pay, there is a high probability of policy relapsing because of the payment default. Limited pay has the potential to save approximately 55% in premiums due to the advance payments. No discounts are provided or no rewards are earned for the premiums paid in the case of a regular pay term insurance plan.

Wrapping It Up!

However, it is to be mentioned that Regular pay term insurance plans might have some advantages over a Limited Pay term insurance plan. But it all depends on the individual’s requirements such as the type of premium payment plan that suits their needs. 

Multiple companies such as ICICI Pru, Max lIfe offer the option of limited pay term insurance where you can compare plans online and buy the most suitable plan for you. Online medium helps you in finding out the easiest way to get the ideal term insurance plans as per your customization and preferences. Plan can be purchased easily using digital modes of payments because these modes are quite convenient and offer a hassle-free process on to go.

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