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Making the Most of the Limited Pay Option in a Term Plan

Making the Most of the Limited Pay Option in a Term Plan

Are you planning to buy a term insurance cover? If yes, you might find the limited premium payment option an attractive feature. In fact, you may even want to pay the entire premium in a single instalment.

Yet, you might think that there must be a catch here since, how could anything be this amazing and not have a hidden cost. Let’s find out.

What is Limited Pay Option in Term Plan?

The usual premium payment term of any life insurance plan, including the term plans, is equal to the policy term. For example, if you are 30 years of age and buy a 30-year life insurance policy:

  • You will pay 30 annual premiums, or
  • Until there is a death claim on the policy and policy terminates

So, unless there is a death claim after which the policy will be over, you will need to pay the premiums.

Limited pay option is a feature in life insurance plans where you can pay all the due premiums within a much shorter time frame. For example, within five years for a policy that will continue, if without claim, for 30 years.

Why Do You Need Limited Pay Option?

Life insurance in any form is usually a long-term commitment. Often, it is difficult to predict the type of changes you may face over these many years. At times you may even have plans for yourself as well.

Scenarios when you will find limited premium option useful:

  • You plan a major career shift – from job to business
  • Looking forward to a sabbatical in near future
  • Buying a Whole Life Cover

As you can imagine, you would want to keep your financial commitment at a low while planning and executing major career shifts or while going for higher education. The limited premium payment option relieves you from the burden of paying the insurance premiums at such times.

In the case of whole life plan, you will anyways need to use limited payment term so that you can finish paying all the premiums before your retirement.

Advantages of Limited Premium Payment

Apart from being useful in continuing the life cover in financially difficult times limited premium payment term offers more advantages.

Enjoy A Discount on Premiums

Limited Premium Payment is a great option that lest you remain covered for longer, while you pay less number of premiums. It is great when you want to pay the premiums while you are still working and have a regular income, while you can stay covered even when you retire.

Limited payment option also allows a discount on the total premium. Shown below is a table of limited payment options under the iSelect Star Term Plan, and it is evident that the faster you pay the premiums the lower the total premium payment gets.

Limited Premium Payment

Is There Cover of Covid-19 Infection in Regular Health Insurance Policy?

According to guidelines issued by the IRDAI (Insurance Regulatory and Development Authority of India), all the claims related to Covid-19 treatment (including quarantine period) will be eligible to gain coverage under a standard health plan. It will be there to help the insured with the normal cover on hospitalization for all viral infections, including Corona. All the features you enjoy under your chosen health insurance plan will also apply to Covid-19 treatment. But to avail treatment through your medical insurance, you must be hospitalized at least for 24 hours. In the event of hospitalization, all your expenses will be covered for treatment of disease, including pre and post hospitalization expenses.

Utilize Higher Tax Benefit

The life insurance premium you pay reduces your tax liability for the financial year, with a rebate under section 80C. Considering the maximum 80C limit is Rs. 1.5 Lakhs you have ample space to save taxes using life insurance premiums.

We know that the annual premium for a Rs. 1 crore term plan comes around just Rs. 12,000, if you are 30 years of age. But if you decide to pay all the premiums for the next 30 years within the next 5 years your premium would be slightly more than Rs. 45,000.

Avoid Policy Lapse

If anything, the recent COVID-19 situation has taught us, it is the importance of preparedness for an emergency. We have seen how fast the economic situation can turn upside down. And the last thing you would want in such times is your insurance plans to lapse. So, the limited premium payment option also saves the life cover (and the associated benefits) from lapsing due to unpaid premiums.

So, you can see there are multiple ways you can take advantage of the limited payment term and enjoy continuous insurance cover, that too at a discounted premium rate. This is especially useful in a term plan, as you would want the cover to continue regardless of the long-term financial situations.

Speak to an insurance specialist now!

Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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