Term life insurance plans offer considerable amount of coverage at low premium rates as compared to other types of life insurance plans, making an important addition to your financial portfolio. A term plan is a valuable investment in the financial security for your loved ones, when you are not present. The plan pays the sum assured in case of your premature death during the policy tenure. It enables your family to meet their day-to-day expenses as well as save for future financial liabilities, with the death benefit received under the plan. It is obvious that higher the sum assured of your term insurance plan, higher is the death benefit received and therefore, the level of financial security for your family.
As consumers demand products and services that solve their individual purpose, service providers are providing more options that are customized to their needs and the insurance sector is no exception. Everyone looking to buy an insurance policy now have the option to choose premiums, term, features, and coverage as per their custom requirements. One such plan, popularly known to be structured to suit the preferences of the insurer, is a limited pay term plan.
Limited pay insurance plans give you the benefit of paying insurance premiums for a limited period of time, while ensuring you are covered for an extended period, even when you stop paying your regular premiums. For short, it gives you the advantage of limited premiums and a continuous cover. For instance, you buy limited term insurance for a term of 25 years, with premium to be paid for only 10 years, then you will have to pay the premium for 10 years but the cover will be extend up to 25 years, while you don’t pay anything for the remaining 15 years.
A limited premium payment plan librates you from the financial burden of paying premiums for longer durations. With this term plan option you can choose longer coverage durations which continue even after you retire, so you know that you wouldn't have to pay the premiums after retirement. As you can opt for higher coverage tenures, you can also enjoy longer risk coverage and the plan becomes more relevant.
1. Premium payments end within a short period
The primary benefit of limited pay option is that it frees you from paying premiums for your term insurance plan for a long period. You only have to pay the premiums for a limited, pre-decided tenure while your plan keeps running for longer. Thus, if planned right, limited premium plans can help you pay off your premiums within your active working life before you retire in peace.
2. Reduces the chances of policy lapse
Since the premiums are payable for a limited duration, you don't have to make the efforts of paying the premiums on time for a longer period. The premiums are paid off within a shorter duration, and the possibility of your policy lapsing reduces. And one the premiums end, you can enjoy uninterrupted coverage under the plan without the risk of a lapse.
3. Better tax benefits if Sec 80C limit not fully used
It is understandable that when you pay premiums for a limited period, the annual premium outgo increases. As the premium cost are all paid within a short period of time, limited premium plans have higher annual premiums than regular plans. This higher premium lets you maximize the deduction available under Section 80C of the Income Tax Act, which allows deductions up to Rs 1.5 lakhs from gross total income. However, you can claim the maximum possible deduction under this section only if this limit is not already reached by other tax saving expenditures and investments you have made.
4. Suitable for individuals with a short career span
Owing to the current work culture and freelance work practices, there are several individuals who have a short career span or expect to earn only for a short period of time. These individuals may not be comfortable with long term premium commitments of a regular premium plan; therefore limited premium payment is a great option worth considering. It will free them from long-term premium payment obligations and ensure they are covered for longer even when their incomes are unstable or limited.
A limited pay term plan owes its popularity to the flexibility and customization it offers to the insured. If you are looking to buy a sound term insurance plan that gives you several benefits at nominal premium rates, then the iSelect+ Term Plan by Canara HSBC OBC Life Insurance can be the thing for you. You can easily customize the plan as per your need, so that your coverage lasts for a longer time.
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