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Term insurance is a type of life insurance that offers financial protection for a specified period, providing coverage to your family in case of your untimely demise. One of the key aspects of term insurance is how the premiums are paid. In term insurance, regular premium refers to the periodic payments made by the policyholder to keep the insurance policy active.
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Let us understand what regular premium means in term insurance, its benefits, and how it compares to other premium payment options.
A regular premium in term insurance is the amount you pay at fixed intervals (monthly, quarterly, half-yearly, or annually) to maintain your life insurance coverage. As long as you continue to pay these premiums throughout the policy term, your life cover remains active. In the event of your death during the policy term, the insurer will pay the sum assured to your beneficiaries, ensuring financial security for them.
Regular premiums are generally affordable and are spread out over the entire policy term, making it easier for policyholders to manage their financial commitments.
Term Plans
When you buy a term insurance policy, you have the option to choose the premium payment frequency. If you opt for regular premium payments, you commit to paying a specific amount periodically (depending on the frequency you choose). This keeps your policy active and guarantees that the insurance company will pay out the death benefit if you pass away during the term of the policy.
For example:
Monthly Premiums: You pay a small amount every month.
Annual Premiums: You pay a lump sum once a year.
Regardless of the payment frequency, regular premium payments help maintain your life insurance policy and ensure continuous life coverage for the policy term.
Let’s consider an example to make things clearer:
Ravi, a 35-year-old salaried professional, wants to secure his family’s financial future with a 1 crore term insurance. Ravi chooses a 20-year policy with regular premium payments. After comparing various payment options, he opts for monthly premium payments as it fits his monthly budget.
Ravi’s premium is ₹1,000 per month. As long as he pays this amount every month, his policy remains active, and his family will receive ₹1 crore if something happens to him during the policy term. By opting for regular premiums, Ravi ensures that his family is financially protected without having to make a large upfront payment.
When opting for regular premiums, you can typically choose from the following various payment frequencies:
Monthly Premiums: This option allows you to pay smaller amounts every month, making it easier for people to budget. This is ideal for those with monthly income and expenses.
Quarterly Premiums: With this option, you make payments every three months, giving you more flexibility than monthly payments but with more frequent payments than an annual option.
Half-yearly Premiums: This requires payments twice a year, which can be a middle ground between quarterly and annual premiums.
Annual Premiums: Here, you pay the entire year’s premium in a single payment as annnualised premiums. Although the amount is larger, it can sometimes be more convenient for those who prefer to deal with one large payment rather than several smaller ones.
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Opting for regular premium payments in term insurance has several advantages:
Regular premium payments break down the total cost of the best term insurance policy into smaller, manageable amounts. For individuals with limited cash flow or fixed monthly expenses, paying premiums regularly can make it easier to maintain life insurance without putting a strain on their finances.
Policyholders can choose the frequency that best suits their financial situation. Whether you prefer monthly, quarterly, or annual payments, regular premiums offer flexibility in terms of how often you need to make payments.
As long as you continue to make the regular premium payments, your term insurance policy remains active. This guarantees that your family will receive the sum assured if something happens to you during the policy term.
Regular premium payments can be easily managed with your monthly or annual budget. Many individuals find it easier to spread the cost of their insurance over time rather than paying a lump sum upfront. It is advised taht you use a term insurance premium calculator to check the premiums applicable for your profile.
Like other life insurance policies, regular premium payments for term insurance may also be eligible for tax deductions under Section 80C of the Income Tax Act. This can help reduce your taxable income, giving you additional financial benefits.
When purchasing term insurance, you will often have the option to choose between a regular premium plan and a single premium plan. Let’s explore how these two differ.
Payments: Made periodically (monthly, quarterly, half-yearly, or annually).
Amount: Each payment is smaller compared to a single premium.
Flexibility: Offers flexibility in terms of payment schedules.
Ideal for: Individuals with regular income streams who prefer to spread payments out over time.
Payments: Made once as a lump sum at the time of policy purchase.
Amount: A larger, one-time payment.
Flexibility: No flexibility, as the entire premium is paid upfront.
Ideal for: Individuals with substantial savings who prefer to make a single payment and be done with it.
In general, a regular premium plan is better suited for individuals who want to manage their cash flow more easily, while a single premium plan may be ideal for those who have the financial capacity to pay a large amount upfront.
When selecting a regular premium payment plan for your term insurance policy, there are a few factors to keep in mind:
While regular premiums spread out the cost of your insurance, you still need to ensure that you can afford the premiums over the long term. Missing payments can result in the policy lapse, leaving your loved ones without coverage.
Consider how often you are comfortable making payments. Monthly premiums are easier for most people to manage, but if you prefer fewer payments, quarterly or annual premiums may be a better option.
The length of the policy term is also important when deciding on regular premium payments. If you opt for a longer policy term, make sure that you can commit to paying the premiums regularly throughout the term.
Think about how your term insurance fits into your overall financial planning. Regular premium payments should align with your long-term financial goals and other commitments.
Choosing a regular premium payment for term insurance lets you spread the cost over time, making it more manageable and affordable. Whether paid monthly, quarterly, or annually, regular premiums provide continuous coverage, ensuring financial security for your loved ones. By aligning your premium frequency with your budget and goals, regular payments offer flexibility and help integrate life insurance into your financial plan.
†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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