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Term life insurance with a limited premium payment plan is a smart choice for individuals who want to balance affordability with long-term coverage. This allows policyholders to pay off the premium within a shorter period of time, while still enjoying full coverage for the entire policy term.

In such a term plan, the coverage remains active until the age of 60, while the policyholder pays the premiums for a shorter period (5 to 15 years). Although the annual premium for such plans is higher than regular plans, the total premium outlay over the years is lower compared to a regular term plan.

It is also an ideal option for people whose earning potential is highest in certain years, such as early to mid-career. Rishabh Garg, head of term life insurance at Policybazaar.com, says this will help individuals who want to secure their family’s future without having to pay lifetime premiums. If an individual has a clear financial goal, such as a child’s education or retirement planning, a limited payment term may suit their specific needs. “By paying off premiums early, they can focus on other financial goals, such as retirement,” he says.

Regular versus limited salary

With a regular payment plan, there is a greater risk of lapse because payments extend over a longer period of time. However, with limited wages there is less risk of missed payments because they have fewer years to be paid.

With regular insurance, coverage is only valid as long as the policyholder pays the premiums. But with a limited pay plan, coverage continues even after premiums are paid, meaning financial security without the ongoing payments.

Suitable for self-employed people

Such a scheme is suitable for self-employed people due to fluctuations in income. These plans are also suitable for those looking for term plans at a later stage to live but prefer a shorter payment horizon to better manage their finances.

Rakesh Goyal, director of insurance broker Probus, says a plan with limited premium payments is more cost-effective than a plan with a regular term. “While the premiums for a limited payment plan may seem higher at first, the overall savings in the long run make it a better financial decision for many,” he says.

Higher advance payments

Before purchasing term life insurance with a limited premium payment term, it is important to assess whether the premiums during the limited payment term fit within your current budget, as these plans often require higher upfront payments.

The individual must ensure that the duration of coverage is consistent with financial goals, such as securing the family’s future until the children are financially independent or the loans are paid off. Assess any outstanding debts or future financial obligations, such as children’s education or retirement savings, to ensure the cover you choose will adequately meet these needs in your absence.

The policy term must correspond to the financial situation of your surviving relatives dependence on you. “If you have young children, consider a longer period of coverage until they are financially independent,” says Pankaj Nawani, CEO of CarePal Secure.

Individuals should also consider optional extras, such as critical illness or accidental death benefits, which can increase the value of the policy. While these add-ons may increase premiums, they can provide valuable protection tailored to your needs.