Buying a term insurance plan ensures that the financial future of your loved ones is secured even if you won’t be around. The term insurance plan plays an important role as it pays the assured sum to your loved ones in case of your premature death. The sum assured is a way to replace the income that you won’t be able to provide, and it will help your dependents meet their daily income needs as well as achieve future life goals.
Term insurance is a cost-effective and affordable financial security that you can give to your family as the premium is lower as compared to other life insurance products that also provide investment benefits. Given the benefits of pure insurance, it is important to buy term insurance with an ample sum assured.
When it comes to term insurance plans, there are many products available in the market with different premium payment plans, rider benefits etc. To make premium payment convenient for customers, many insurance companies offer payment options such as limited premium or single premium. In this article, we take a look at various aspects of limited premium payment for term insurance and how it affects customers.
What Is Limited Premium Payment Term Insurance?
Limited premium payment term insurance plans give you the option to pay premiums for a limited period while the coverage continues for longer. For instance, a limited premium term insurance for 30 years allows you to pay premiums for the first 15 years only. You are not required to pay premiums for the remainder of the tenure even though the coverage continues.
How It Works
Normally, when people buy term insurance plans, they prefer the regular payment mode as the premiums are lower. But a regular premium payment calls for payment for the entire duration of the plan to keep the policy in force even if you are retired and there is no regular source of income. In such a situation, limited premium payment term insurance may help.
Benefits Of Limited Premium Plans
- You need to pay premiums for a shorter duration when compared to a regular term insurance plan. This lets you pay off your premiums during your working life. You can spend your retirement years without the burden of insurance payments.
- You are eligible to claim tax deductions under Section 80C of the Income Tax Act. You can claim a deduction of up to Rs. 1.5 lakh from your taxable income for the life insurance premium paid. Limited premium plans have a higher premium when compared to regular term insurance plans.
- You can enjoy a long and comprehensive coverage even though you pay premiums for a limited number of years.
- The chances of policy lapse in the later years reduce as the premiums are payable for a short duration.
- You can save up to 55 per cent in premiums by opting for advance payments.
- You have the option of surrendering the plan and get an adjusted value.
Who Should Get A Limited Premium Plan?
Ideally, a limited premium payment term insurance plan is suitable for those individuals who have/are:
- A limited career span
- Going to retire soon
- Flexible income
- Employed in an unpredictable field
- Fluctuating monetary situations
- Looking for plans with convenient payouts
Before deciding on whether you should avail a limited premium term plan, taking a closer look at your financial plan, monetary conditions and life priorities are necessary. Term plans come in many variants. Go for one that suits your needs. You can also go for the single premium plan where you pay the entire premium upfront.
Term plans have no maturity benefits but they certainly ensure peace of mind for you and your family, financially speaking. Do not skip it while planning your finances.
The writer is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.