Limited Premium Payment Term In Term Insurance
If you are looking for a way to secure the future of your family in the face of any unexpected developments, a term insurance policy can come to your rescue. There are many different types of term insurance plans in India, and you can check out your options before you decide on the term insurance plan that suits your needs and your family’s requirements.
In case you are not sure about how to get started, a good thing to do is to understand what term insurance is all about. Let us help you out by clearing up what the term insurance meaning is.
What is term insurance?
Simply put, a term insurance plan is a type of a life insurance plan. When you purchase a term insurance policy, the insurer provides you with a life cover for a specific tenure of your choice. In return, the insurer charges periodic payments known as premiums. In the event of your unfortunate demise during the tenure of the plan, the insurer disburses a certain sum of money to your nominees/beneficiaries. This is known as the death benefit.
The premiums of a term insurance plan are lower when compared to other traditional life insurance products because term insurance is a pure life cover. So, now that we have the term insurance meaning out of the way, let us look at another important phrase related to term insurance plans - the premium payment term.
What is the premium payment term?
In layman terms, the premium payment term is simply the period or the tenure over which you pay the insurer premiums for the life cover you purchase. In other words, the entire duration for which you are obligated to pay premiums to the insurer is known as the premium paying term or the premium payment term.
This is not to be confused with the policy term. The policy term is the entire duration for which you get to enjoy the benefits of term life insurance. In other words, it is the period over which the life cover offered by the plan remains in place.
Let us look at an example to understand this well. For instance, let us assume that you opt for a term insurance plan that offers you a life cover for a period of 30 years. Here, the 30-year period is the policy term. Usually, in the case of a majority of term life insurance plans, the premium paying term is often the same as the policy term. So, you would be required to pay premiums for the plan for 30 years.
What is the meaning of limited premium payment term in term insurance?
In a limited premium payment term insurance policy, the premium payment term is always lower than the policy term. Therefore, this means that you will not have to pay premiums for the entire duration of the policy. However, you will continue to enjoy the benefits of the life cover until the end of the policy term.
Here is an example that can help you understand what a limited premium payment term insurance plan is –
Let’s say, as we saw in the earlier example, that you opt for a term life insurance plan that offers you a life cover for a period of 30 years. However, you are required to pay a premium of Rs. 20,000 per year for the cover, only for a period of 10 years instead of for the full tenure of 30 years. Therefore, here, the policy term is 30 years, while the premium paying term is shorter, since the premiums are only due for 10 years. These plans are referred to as limited premium payment term insurance plans.
Benefits of limited premium payment term in term insurance
There are many term insurance plans in India that offer you the option to pay your premium for a limited period. This can be advantageous in many ways –
• Your financial burden is reduced, since you do not need to pay premiums for extended periods.
• Since the premium payment period is limited, the chances of you missing a payment are also reduced. This minimizes the chances of policy lapses.
• In case you are self-employed, or you do not want to commit to a longer tenure, limited premium payment term plans are the perfect option.
Given these benefits, you will no doubt find limited premium payment term plans useful in many ways. If you have not purchased a term plan yet, you may consider making this smart decision and secure your family’s financial future, so they can keep up with their life goals on track no matter what.
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