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Advantages Of Limited Premium Payment Term Insurance Plans

Updated On Oct 13, 2023

A term insurance plan pays the sum assured in case of your premature death during the policy tenure. With the death benefit received under the plan, your family can meet their day-to-day expenses as well as save for future financial liabilities. Obviously, higher the sum assured of the plan, higher the death benefit and the level of financial security for your family.

Limited premium payment plans are term life insurance plans that allow you to pay premiums for a limited tenure while your coverage continues for a longer period. For instance, if you buy a term plan with a coverage term of 25 years and a premium payment term of 10 years, you would have to pay premiums only for 10 years while the coverage would continue for 25 years.

Benefits Of Limited Pay Option

Limited premium payments tackle the financial burden of paying premiums for longer durations when you choose longer coverage tenure. Here are the benefits of limited-term insurance single premium payment -

1. Premium Payments End Within A Short Period

The main benefit of the limited pay option is that it frees you from paying premiums for your term insurance plan for a long period. You just have to pay the premiums for a limited tenure while your plan runs longer. Thus, limited premium plans also allow you to pay off your premiums within your active working life before you retire.

2. Allows Longer Coverage Durations

When you know that you wouldn't have to pay the premiums after retirement, you can choose term plans with longer coverage durations which continue even after you retire. As you can choose higher coverage tenures, you can also enjoy longer risk coverage and the plan becomes all the more relevant.

Also read - How Much Term Insurance Cover Should One Buy?

3. Reduces The Chances Of Lapse

Since the premiums are payable for a limited duration you don't have to remember paying the premiums on time for a longer period. The premiums are paid off earlier and the possibility of policy lapse reduces and becomes nil in later years of the policy. You can, therefore, enjoy uninterrupted coverage under the plan without the risk of lapse.

4. Better Tax Benefits If Sec 80C Limit Not Fully Used

When you pay premiums for a limited period, the annual premium outgo increases as the premium cost is recovered by the insurer within a short period of time. Limited premium plans, therefore, have higher annual premiums than regular premium plans. This higher premium lets you maximize the deduction available under Section 80C of the Income Tax Act. The section allows deductions up to Rs 1.5 lakh from gross total income and a higher premium helps you claim the maximum possible deduction under this section, provided this limit was not already reached via other tax-saving expenditures and investments.

5. Suitable For Individuals With A Short Career Span

There are individuals who have a short career span or expect to earn only for a short period of time. For instance, there might be self-employed individuals who are unsure how long their business will last or sportsmen whose careers might be limited. Such individuals may not be comfortable with regular premium plans requiring long term premium commitments. For these individuals, limited premium payment is an option worth considering as it frees them from premium payment obligations within a short time when their incomes are stable.


However, it needs to be mentioned that regular premium payment life insurance plans also have certain advantages as compared with limited premium payment plans. It is up to the buyer to evaluate and choose the type of premium payment plan that suits him/her after evaluating the pros and cons of both types.

You may also like to read - Term Insurance V/S ULIP: Which is Better?

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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