Understanding The Differences Between Policy Term And Premium Payment Term
Published On Sep 15, 2021 10:00 AM By InsuranceDekho
Term insurance plans offer coverage for a specified period of time known as the policy term. The policy term in fact refers to the amount of time for which the policy remains in force, provided that your premiums are paid on time. To sum up, a policy term is a duration during which you can enjoy the policy benefits.
On the other hand, the premium payment term is the total number of years for which policyholders are required to pay the premium. Now, insurers have made a number of changes to their terms and conditions so that policyholders can enjoy flexible payment terms.
Difference Between Policy Term And Premium Paying Term
While the "policy term" meaning is quite straightforward, it is often confused with another insurance-related topic - "premium paying term". There is a huge difference between these two terms, which is why they shouldn't be used interchangeably. Both terms refer to time periods; however, they are closely associated, but there is a striking difference between them.
A term insurance policy's term is determined when it is purchased, and it refers to the length of time for which it will remain active. However, the premium-paying term refers to an altogether different concept. As the name implies, the premium-paying term is the period during which the policyholder pays premiums for his or her life insurance policy, which is why the terms are frequently confused. In most cases, the premium-paying term coincides with the policy term. However, some insurers allow the premium paying term for a term plan to be shorter than the policy term.
For example, if you purchase a term insurance plan that provides coverage for 40 years, the policy term will be 40 years. However, your insurer might allow you to pay off the premiums for your term plan over a period of 20 years. Hence, in such a case your premium paying term will be just 20 years.
The right term insurance plan and the right insurer are essential, but figuring out how long to keep the policy for yourself and your beneficiaries is just as critical. In order to make the most of your term insurance plan, make sure that your policy term is well aligned with your age, liabilities, and life goals. So, make sure to consider everything before you make an informed decision about your preferred term insurance plan.
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Disclaimer: This article is issued in the general public interest and 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.