A term plan is an important type of insurance that provides financial security against the risk of death during a specified period. Limited Pay Term Insurance is a special variant of such policy that offers you the advantage of paying premiums for a limited period, usually 5-10 years, without compromising coverage benefits.
This policy helps to provide security to your family if something untoward happens to you. In this article, we will understand what limited pay term insurance is and how it works so you can make decisions about investing in one.
What is Limited Pay Term Insurance?
Limited Pay Term Insurance is a term policy wherein you have the flexibility to pay premiums for a limited period, usually 5-10 years. Once the premium payment has been completed, the policy will still protect your family, and no further payments will be released. This type of insurance provides a great way to secure your family’s future without having to strain your finances in the long run.
Why is Limited Pay Term Insurance Needed?
It is essential to have a term plan as it is beneficial in providing financial security to your family in case something unexpected happens to you. This type of insurance helps ensure that any economic difficulties in the event of your death or disability will not burden your family. The limited pay option offers the added advantage of allowing you to pay premiums for a fixed period only, thereby reducing your overall expenditure on premiums over time.
Benefits of Limited Pay Term Insurance
Several advantages come with investing in this type of policy:
- It eliminates or reduces the long-term financial burden associated with paying regular premiums over an extended period, as it allows you to make fewer payments over a shorter duration.
- The cover amount remains intact till maturity or death, whichever is earlier.
- In case of demise, your family will receive a lump sum amount which can help them maintain their lifestyle and cover expenses.
- It also offers tax benefits to policyholders according to applicable laws such as Section 80C of the Income Tax Act.
- It is more affordable than other life insurance policies and provides good value for money
How to Calculate the Premium Payment for a Limited Pay Term Plan
The premium payment for a limited payment term plan is calculated based on certain factors like your age, health condition, sum assured, and the duration of the policy. Most insurance companies offer online calculators that make calculating the premium amount required to avail this type of plan easier. Moreover, you can also customize your policy by opting for additional riders that further reduce the premium outgo.
Things to Consider When Purchasing a Limited Pay Term Plan
The sum assured is the most important thing to consider when selecting a limited pay term plan. It should be adequate to cover all your financial obligations so your family can maintain their lifestyle even in your absence.
You can also opt for additional riders, such as critical illness or accidental death riders, which will be available at an extra cost but provide added protection to you and your family.
● Payment Options
Most insurance companies offer flexible payment options, including monthly, quarterly, and annual payments. Choose one that is known to best suit your budget and needs.
● Reputation of Insurance Companies
Make sure you purchase the policy from a reputed insurance company with excellent customer service and a claim settlement ratio. This will make sure that you/ your family receive the best coverage and benefit from the policy in case of any eventuality.
● Review the Policy
Read the document carefully and make sure that you understand/know all its terms and conditions before signing up.
Limited pay term insurance is a great way to provide financial security to your family if something untoward happens to you. It allows you to pay premiums for limited periods and provides important tax benefits. Make sure you choose wisely by considering all the above factors to protect your family in case of any eventuality. With the right plan, rest assured that your loved/close ones will be cared for if something happens to you.