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Benefits of Limited Premium Payment Term Plans: A Comprehensive Guide

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Benefits of Limited Premium payment Term Plans
November 03, 2023

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A term insurance plan is a crucial part of every good financial plan. It’s one of the most affordable ways for individuals to get life cover for themselves and secure their family’s financial future. If anything happens to the policyholder during the policy term, their family receives the sum assured amount as a payout. The money provides them with financial security when they need it the most. Today, individuals can choose between several term plan options. One common type of plan is the limited premium payment term plan. Let’s take a look at what this plan offers.

What Is Limited Premium Payment Term Insurance?

Limited pay term insurance policies allow policyholders to pay their premiums for a shorter span. So, you can purchase a limited premium payment term policy for 40 years with a premium payment term of just 20 years. You only have to pay premiums for the first 20 years. For the remaining 20 years, you still enjoy life coverage but do not have to pay any further premiums.

The Advantages of Limited Premium Payment Term Policies

Limited premium payment plans offer a bit of financial relief. But that’s not the only reason why they’re beneficial. Here’s a look at the other advantages of such a plan:

  1. Short Premium Payment Term

    The biggest advantage of such a term insurance plan is that it crunches the amount of time for which you have to pay premiums. Ideally, this works well if you’d like to finish paying your premiums before you retire but continue to enjoy coverage even after. So, assume you’re 35 and want to purchase a term policy. You choose a policy that offers coverage for 25 years, but you intend to retire at the age of 50. So, you pick a limited premium payment policy with a premium payment term of 15 years. You will finish paying the premiums by the time you retire, but can continue to enjoy life coverage and peace of mind for another ten years.

  2. Minimizes the Chances of the Policy Lapsing

    Every time you pay a premium, you risk the chance of missing the due date and letting your policy lapse. With a limited premium payment term insurance plan, you can significantly reduce the chances of this happening. Since you pay premiums for a shorter span of time, it’s easier to ensure all the premiums get paid on time. With all your premiums paid on time, you do not have to worry about losing your insurance cover.

  3. Optimises Tax Benefits Under Section 80C

    Most people opt for term plans since they’re very affordable. So, your annual premium payments often do not cross INR 1,50,000, which is the maximum deductible available under Section 80C of the Income Tax Act*. When you pick a limited premium payment policy, you pay higher premiums for a shorter span. So, you can maximise the income tax benefits with this policy.

  4. Suitable for Those with Short Career Spans

    Many individuals today opt to retire early and spend their 50s and 60s travelling or investing time in their hobbies. These people can benefit the most from a limited premium payment term insurance plan. They can pay the premiums while they’re still working and earning, but enjoy the life coverage for a much longer time.

Features of Limited Pay Term Plan

Let’s take a look at the features of limited premium payment term plans:

  1. Short Payment Periods

    Individuals purchasing a limited term policy can plan their finances around larger term plan premium payments. The shorter premium payment period makes it easier for individuals who work in unpredictable environments to make a bulk of the payments while they still have a steady income.

  2. Longer Coverage

    The most important feature of these term plans is that they offer coverage for more years than the premium payment period. With such a policy, individuals can continue to enjoy cover well into their retirement without worrying about the burden of paying regular premiums.

    Opting for a limited premium payment term insurance plan is a great idea for individuals who have shorter careers or are near retirement and would like life cover for a longer period.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

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*Subject to conditions specified u/s 80C of the Income tax Act, 1961.

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