A term insurance plan is an essential addition to your financial portfolio. The main objective of a term plan is the financial protection of the family when you are no longer around to fulfill their needs. A term plan offers life coverage to meet the financial goals of your entire family in return for the premium. However, failure to pay the premium leads to the lapse of the policy, which eventually ceases the term insurance benefits.
As a policyholder, you should pay the premium regularly to ensure your family is financially secure after you are gone. However, regular premiums mean that you have to keep paying the premium until the policy tenure. Such a mode of premium payment might prove disadvantageous for you if you face a cash flow mismatch of financial crunch in the future. Therefore, you should opt for a term policy, which allows limited premium payment.
Before selecting a term insurance policy, let’s understand what a limited-premium term insurance plan is:
What is limited-premium term insurance plan?
As the name suggests, a limited-premium plan allows you to make the premium payment for a limited tenure while you are covered for a longer period. For instance, if you opt for a coverage term of 25 years, and premium payment term is of 10 years, you will have to pay the premium only for 10 years, and you will continue to receive coverage for 25 years.
When you choose an option of limited-premium term plan, you don’t have to worry about paying premiums throughout the policy period. In addition to this, there are five essential benefits of availing a limited-premium term insurance plan given below:
- Offers long coverage period
When you know you don’t have to worry about paying the premium even after retirement, you might choose a term policy for a longer duration. When you select a longer tenure of a term policy, you will have a longer coverage against uncertainties. That way, the primary purpose of the protection plan will be efficiently utilized to the fullest even after your retirement.
- Reduces the chances of policy getting lapsed
Since you have to pay the premium for a limited duration, you need not worry about paying the premium for too long. Under a limited-premium term insurance policy, the premium is paid off early, which eventually reduces the risk of policy getting lapsed. On selecting the limited premium option, you can enjoy an uninterrupted coverage without the chances your policy getting lapsed.
- Provides better tax benefits
Paying a premium for a limited period means an increase in the annual premium outgo since your insurer recover the premium cost within a short time frame. Unlike regular premium plans, limited-premium term insurance will have a high annual premium. A high premium will allow you to maximize the tax deduction offered under Section 80C of the Income Tax Act, 1961.
- Offers short premium payment term
The primary benefits of a limited premium option are the freedom to pay premium only for a shorter duration. All you have to do is pay the premium for a short period while enjoying the coverage benefits for a longer tenure. Moreover, a limited premium option lets you pay the premium within the active working years of your life.
- Accomplishes your short career span
There are specific individuals who aim to work only for a short period. For instance, an athlete might have a limited career span. Such individuals might not be comfortable with the idea of paying a premium on a regular basis for a long duration. If you fall under the similar category, opt for a term insurance policy with limited-premium payment option.
To sum up, you should identify your financial goals and family goals before opting for a term insurance plan. Evaluate your needs and choose a term insurance plan option, which effectively suits your needs. Compare policies online and select a term plan accordingly, considering its advantages. An online purchase is hassle-free, affordable, and time-saving.