If you’re wondering whether or not to opt for a limited insurance policy, we have all the answers. Read on.
Undoubtedly, getting Life Insurance for yourself and your family is the smartest thing you’ll ever do. If you think you’ll be stressed out about paying the premium for every single policy that you take, we have a good news for you.
Did you know that you can choose to take up a limited insurance payment policy? Yes, the ones that don’t need you to keep paying the premium throughout your life. Instead of making a multi-year commitment to keep paying the premium, you can easily opt for smaller payment plans.
Additional Reading: 8 Reasons Why You Should Buy Life Insurance
Although the advantages of limited insurance plans are quite clear, you still need to find out if they work for you. Let’s learn more about these plans.
What Is A Limited Insurance Payment Policy?
It’s a Life Insurance policy where you can avail a whole life policy and pay only for a certain period. Basically, you pay a premium for a predefined number of years and you have the policy for the rest of your life. Sounds cool, doesn’t it?
Additional Reading: All You Need To Know About TDS On Life Insurance Policies
What Are The Key Choices Related To Limited Insurance Payment Plans?
To understand the working of these plans better, let’s have a quick look at some of the plan choices involved.
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Life Income
If you choose life income, the Life Insurance company is supposed to pay this income to your beneficiary for as long as they live. Upon their death, the Life Insurance company isn’t liable to pay any more income even if payment has only been paid for only one month. If the beneficiary lives a long life, the insurance company will have to pay for a lot more than just the face amount of the policy. Contrarily, a short life won’t yield much for them.
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Fixed-Period Income
If you choose fixed-period income, you can tell the insurance company to pay the proceeds of your policy to the beneficiary in equal amounts over a certain period. The amount paid out will be more than the lump sum insurance amount.
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Fixed-Amount Income
In this case, the proceeds of your policy can also be paid to the beneficiary in fixed amounts. You can ask the insurance company to pay a certain amount to the beneficiary until the proceeds are exhausted. This always amounts to a considerably greater amount than making payments in a lump sum.
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Interest Option
If you choose this option, you can have the lump sum paid upon your death held by the insurance company and only the interest paid out each year.
Additional Reading: Life Insurance Industry In 2018 – The Expectations
What Do You Need To Watch Out For?
Some crucial things that you need to keep in mind are:
- You can find limited premium paying options in other insurance policies too but they are mostly used in endowment plans. The returns offered by these plans are very low, in the range of 5-6%, as they primarily invest in secure-debt instruments.
- Term plans can give a bigger life cover at a lower price. PPF can give tax-free returns and ELSS funds can give higher returns.
Are Limited Insurance Payment Plans For You?
After getting all the details about these plans, the most important question you need to ask is—will this plan suit you or not. Here’s how you can check that:
- If you are someone with no fixed income or someone in their retirement period and don’t want to get involved with paying premiums for a long time, this might be a good option for you.
- If you are someone with a flexible income stream, as any sudden increase in income will allow you to pay due premiums without failure, you can opt for these plans.
- In case you are someone who’s not sure whether or not you’ll be able to able to commit and pay a long-term premium, it makes sense for you to opt for this plan.
Limited payment or not, we have a lot of insurance plans for you to choose from. What are you waiting for?