Limited Pay Insurance plans: Meaning and Benefits

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An insurance policy is a signed deal between a policyholder and an insurance company. This contract promises a sum assured to the policyholder or their beneficiaries under certain circumstances; this can either be a death benefit or a maturity benefit. In exchange for the sum assured that they are paid, the policyholder pays a premium to the company.

While making the premium payments, one can either opt for a Single, Regular or Limited premium payment method. Let’s look into what a limited premium payment is and what its benefits are. 

What is a limited premium payment?

In limited premium payment, you will have to pay the premiums on the policy for a fixed period of time. However, you are eligible for the insurance cover even after you stop making the payments. For example, if you get a term insurance policy for a time period of 30 years, you can settle your premium payments in the first 15 years. After that, you can enjoy your coverage for the next 15 years, without having to worry about any payment towards the plan.

Some of the benefits of a limited pay insurance plan are:

  • Tax benefits:

As the duration for premium payments increase, the amount increases as well. A higher premium amount helps you get insurance with a tax benefit. The premiums paid for the insurance, up to 1.5 lakh, are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. 

  • Premium payments for a short period:

One of the benefits of having this payment plan is that it will relieve you from the premium payment liabilities in a short time. You can pay off your premiums while you are still earning a monthly salary. 

  • Helps with retirement planning:

If you are planning for your retirement, then a limited premium payment plan can help you save on your finances once you stop paying the premiums. For instance, if you have chosen a TROP, you can finish the premium payments before you retire and then enjoy the money-back term plan coverage well into your retirement. Even with small premium payment duration, you get to enjoy comprehensive policy coverage till the policy expires.  

  • Low chances of policy lapse:

Since you have to make the premium payments for a short period of time, you will be less likely to miss a payment. Hence, you can enjoy the coverage without the risk of a lapse.   

  • Ideal for a short career span:

A lot of professionals with a short but fruitful career and an early retirement can benefit from a limited premium payment plan.

You can select from the various types of limited premium insurance plans available with insurance companies. As customers look for a money-saving plan that suits their requirements, insurance companies understand their plight and provide such options for them. 

Thus, a limited pay insurance plan helps you pay off your premiums within a short duration. It relieves you from the stress of making premium payments over the entire tenure of the policy, enabling you to enjoy the benefits without worries. With the best guaranteed income plan, you get maturity benefits as well as tax benefits. Ensure that you read the policy document diligently before investing in any insurance plan.