Difference Between Limited Pay And Regular Pay Term Insurance Policy
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Premium payment is one of the most important parameters considered while purchasing a term insurance policy. Premium of your term insurance policy should fit in your budget keeping in mind your current lifestyle and expenses. You should be able to make regular premium payments to keep the policy active. Premium payment term refers to the number of the years you must pay premium for your term insurance policy, the premium payment term can be equal to or less than the policy term. Different types of premium payment options under a term insurance policy are Single Pay, Regular Pay and Limited Pay.
What is a Limited Pay Term Insurance Policy?
Under this premium payment term, the life assured pays the premium for a pre-decided period of time. The premium payment term for limited pay term insurance is less than the policy term. Under this premium payment the life assured can choose to pay the premium when he has sufficient funds and then choose to pay premium for 5,10,15 or maximum 20 years of the policy term.
What is a Regular Pay Term Insurance Policy?
Under regular pay term insurance policy, the life assured pays the premium for the entire policy term. The premium payment term for a regular pay term insurance policy is equal to the base policy term. Under this premium payment term, the life assured gets the flexibility to choose the premium payment mode such as yearly, half-yearly, quarterly or monthly premium payments. The life assured can choose the premium payment mode as per their budget.
Must read: What is an Increasing Term Insurance Plan?
Difference Between Limited Pay And Regular Pay Term Insurance Policy
Below mentioned are the differences between a limited and regular pay term insurance policy:
|
Parameter |
Limited Pay Term Insurance |
Regular Pay Term Insurance |
|
Premium Payment Time |
Premium payments years are less than policy term and the life assured pays premium for a pre-decided period of time. |
Premium payment years are equal to the policy tenure. The life assured pay the premium for the entire policy term. |
|
Premium Amount |
Under limited pay term insurance, premiums do not increase with the age of life assured. |
Under regular pay term insurance the premiums increase with the age. |
|
Coverage |
Irrespective of the limited premium paying term, the coverage provided is for the whole policy tenure. |
Regular pay term insurance policy provides coverage for the entire policy term. |
|
Policy Lapse |
Policy lapse in case of limited pay term insurance policy is not possible because the premium is paid for a pre-decided period of time. |
In case of regular pay term insurance policy no benefit shall be provided to the life assured, if the life assured stops paying premium on time. |
Limited Pay or Regular Pay? Which Is Better?
Premium payment term affects the purchasing decision of a person, because the policyholder would want a premium that will not bother their pocket. To keep the policy active, the premium shall be paid on time. Regular pay term insurance policy is ideal for a salaried person, and a limited pay term insurance policy is ideal for a person who cannot pay premiums for a longer period of time.
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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.
