What Is A Limited Pay Option In A Term Insurance Plan?

Limited premium payment plans in a term life insurance signify that the premium shall be payable for the limited term of the policy insured and not for the full term of the policy.

For instance, for a 40-year term policy cover, limited premium meaning, a premium for say 10, 15,20 or any number of years less than 40 years. The important matter here is that though the premium is to be paid for lesser years; still the policy will remain in force for the full tenure opted. Post the completion of the payment tenure, the insured is not liable to pay any dues. Hence, in a limited pay term plan, the premium term and the policy term differ.

To know how these plans work, let's first compare them with the regular term policies. In regular term life insurance policies, you have to pay the premiums for the entire policy tenure.

In our previous case of a 40-year term plan, the premium has to be paid for the good 40 years in a regular term policy.

Alternatively, in limited pay option policy, the policyholder is liable to pay the premium for only 10 or 20 years, as the policy suggests. Provided the premium amount for these years is considerably higher than the former one to recover the cost for the later years of the policy.

The policyholder can become free from the premium burden in the later years of his life and can enjoy the full coverage of the policy.

Before hopping onto the benefits and drawbacks of the limited pay option, let us first know for whom this plan is suitable for.

Individuals with the following scenarios are suitable for the limited-term plan option :

1. Personnel working in an unpredictable and uncertain work environment.
2. Commissioned salesmen or brokers with fluctuated income streams.
3. Employees with a Limited and uncertain career span including actors and sportspersons.
4. Early age entrepreneurs and self-employed groups.
5. Middle age individuals seeking retirement in the upcoming few years.
6. Individuals who can afford the initial premium payments.

Having said that Canara HSBC Life Insurance's iSelect Smart360 Term Plan is a Limited premium plans. You can customise it according to your needs and one can go ahead with this if the person is confident upon the initial premium payments and doesn't want to struggle with prolonged premium payments later in his life.