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Picture this: you are 65 years old, sipping coffee in your home's backyard one fine morning. You are lost in the planning of that long-awaited Kedarnath trip when suddenly, your phone rings with a notification, ‘Premium payment for your term plan due in 2 days.’
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The truth is that no one likes interruptions, especially relating to term premium payments. So, is there any way to wrap up your term insurance premiums earlier than the maturity of your policy?
Yes, such term insurance plans are called limited pay term insurance plans. In this article, we will understand limited pay till 5 years in detail.
Note: Know more about what is term insurance first before reading this article.
Term Plans
One of the most effective methods to protect your loved ones from financial burdens is buying a term insurance plan for the times when you are not around. To ensure that your family receives the coverage amount, you must pay all premiums at time-based intervals throughout the duration to keep the cover active.
It means if you take the life cover for thirty years, you will have to pay for the premiums for its entire term to keep the policy in force. However, many things could happen in 30 years like your retirement or you taking a break to pursue higher studies. In some cases, you may not want to keep paying premiums for such a long period.
With a limited pay term insurance plan for 5 years, you have the choice of paying premiums only for five years. It means you will have to pay the premiums for only 5 years but the life cover continues for its entire term that may be more than 5 years.
Note: You can easily calculate the term plan premium by using the term insurance calculator online tool.
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You can wrap up your premium payment in 5 years when you opt for a Limited Pay till 5 plan. Here are other term insurance benefits of the same:
Suppose you plan to buy a term insurance plan earlier and pay a premium early. In that case, the amount you pay is likely to be less due to the less chance of dying in the early years of your life. Additionally, since the amount of financial obligations at this point is lower so you can contribute a greater amount to your term insurance.
You can purchase and pay the necessary instalments before you are married and plan for additional long-term financial goals. It will help you secure the highest amount of life cover for an extended period.
For new policy buyers, it is possible to purchase an insurance policy for life with no proper preparation that may lead to failed premium payments in the long term. It can happen due to sudden financial obligations which may lead to a risk of policy lapse.
Under the limited pay till 5 plan, you can eliminate the possibility of such setbacks for getting the plan benefits.
You can wrap up the premiums quickly (in this case 5 years) for extended policy coverage. If you have planned your income well, you can decide the interval of periodic payments while being employed. You can also prolong the term of your policy during your retirement period without having to pay for it. It is a complete and pre-decided plan that can cover most of your financial needs.
Even if you are forced to pay within the restricted period, you will be able to get all the benefits of the plan. Additionally, even though the cost is set for a particular tenure, the length will be determined and customised to your needs.
When you purchase a term plan with a limited payment tenure, the annual price of the premiums increases naturally. As the premium rates rise each year, the tax deductions as per Section 80C in the Income Tax Act may be increased to allow for up to Rs 1.5 lakhs annually.
Such a plan is suitable for certain types of policyholders who can utilise it in the most effective ways. Following are the types:
Short career - If you are a sportsperson or an artist working in the field of film, your job is typically only for a short period. The earnings may also be limited to a particular tenure.
Unpredictable working environment - If you work with a company that exposes you to specific dangers (like working on a naval base or ships) and cannot endure certain economic changes in the future.
Business professionals- If you are new to business-making and your earnings are not steady.
Retirement - If you are close to retirement, you can opt to pay until you reach retirement age and receive benefits for the rest of your life.
The primary advantage of a limited pay plan is the opportunity of having life coverage for an extended period for which premiums are paid only for limited years. If you can pay slightly higher premium rates, you must consider purchasing a limited pay till 5 plan.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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