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Wednesday, June 23, 2021

How limited premium payment term insurance plan works

Opting for a Limited Premium Plan comes with countless benefits for one's self & family. Who should opt for a Limited Premium Plan & why, know here.


Updated: June 14, 2021 5:31:36 am
LPP term insurance plans are buyer-friendly and come with benefits to keep your financial standing intact

The spread of the Covid-19 pandemic and its devastating impact on the lives of people is making many of them take stock of their finances much more seriously than before. The untimely death of the bread earner may leave a family financially stranded. One’s life goals such as children’s education, marriage, and home buying may also get derailed. The value of protecting loved ones has certainly increased in these times.

While matters of life and death may still be a morbid topic to discuss, the conversations around life insurance should not be brushed under the carpet anymore. Adequate life insurance coverage through a term insurance plan is the need of the hour.

How term plan works
Term insurance plans are low-cost, high cover plans i.e. by paying a few thousand rupees as premium, one can get a coverage of several lakhs, or even crores of rupees. Depending on one’s age, period of insurance and the amount of coverage, the premium is usually required to be paid until the end of the chosen term.

For someone who is in their late 20s or 30s, financial responsibilities such as marriage, home buying, children’s education or any other life goals keep arising at different life stages. By age 60, most of these financial liabilities are expected to be met. But what needs to be ensured is that all these goals are safely and adequately met as and when they arise in one’s life.

And, a term insurance plan with adequate coverage precisely does this – provides protection to family’s goals in the case of untimely demise of the bread earner. The life cover (sum assured) is paid to the nominee/beneficiary on the death of the policyholder anytime during the term of the policy. Now a days, Term Plans also provide for Return of Premium option i.e. one can get their premiums back at the end of the policy term if they survive.


Premium Payments
A Term insurance calculator can be a very handy tool to understand the estimated amount premium you need to pay for your term insurance plan. In order to ensure that the life insurance coverage continues, it is important that the premium is paid regularly and the policy is kept in force till the end of the policy term, which could be for the next 25-30 years or even more. Some term insurance plans provide coverage till the age of 85 or even 100 years.

While the importance of adequate life insurance has come to the forefront, Covid-19 induced job losses, pay cuts are making many individuals face a cash crunch.

Yes, it is possible through limited premium payment (LPP) term insurance plans. For those who may not be comfortable paying a premium for a longer duration, there are options available to pay for a limited period only.

What are limited premium payment term insurance plans
Paying premium in a term insurance plan for a limited period is a feature and does not come as a separate plan basis terms and conditions specified therein. As the name suggests, in a limited premium payment (LPP) option, the premium need not be paid until the end of the term. However, the benefits of the life cover will be available to the policyholder until the end of the policy term.

In a limited premium payment term insurance policy, the premium payment term is always lower than the policy term. For example, if you are 28 and wish to buy a term insurance plan till age 65, you can keep the premium payment term (PPT) as 5, 7, 10, or any other term lesser than the policy term as per options available under the product. Even if you pay for the selected PPT, the life cover will continue till age 65.

How is it beneficial?
The limited premium payment term plans come with their own share of benefits. Here are some of them:

Peace of mind– The future is highly uncertain, and the flow of income can be somewhat visualized over the next few years but not so over a longer period. By paying premium over the initial few years of the policy (using the LPP option) and meeting your commitment early on gives you freedom from worrying about premium payments as you age.

Helps plan other goals– Once you have paid the premium towards the term insurance plan (using the LPP option), you will get more space to commit future income towards other life goals.

Job loss or pay cuts concerns taken care of– As can be seen in the current Coronavirus pandemic, job losses, pay cuts and lockdown restrictions are putting pressure on managing household finances for both salaried and self-employed individuals. Any similar event or any other unfortunate situation in one’s life may put your back against the wall. Using the LPP option, your commitment towards paying premium ends early on and any future exigency will not impact your life cover.

Works with riders– The life cover amount in a term plan is paid to the nominee in case of death of the policyholder. But one may acquire a critical illness like paralysis, cancer, heart attack, etc. which may reduce the earning potential of the individual. Even in such a case, the premium towards the term plan needs to be paid regularly to keep the policy in an active state. Therefore, choosing the LPP feature and opting for health riders such as critical illness benefit provides exhaustive coverage to the policyholder.

Who should opt for a limited premium plan?
LPP plans may suit most buyers of term insurance plans and in particular will appeal to the following groups:

Self-employed: Unlike salaried individuals, the self-employed may not have a fixed and regular income to bank upon. By opting for LPP plans, they can be assured of a fixed life cover till the desired age and yet pay a premium for a limited period.

Those with irregular income: For many individuals, especially freelancers, artists, sportsmen and athletes, the source of income is erratic. At times, there will be a huge cash inflow while at other times, the inflow may be the bare minimum. LPP plans suit them the most given the irregular flow of income.

Anyone who wishes to avoid long commitment: In fact, anyone who wishes to avoid commitment to pay premium for a longer duration should opt for LPP plans. There may be several premium payment terms to choose in a term plan depending on product terms and conditions and one may decide based on one’s financial situation.

Conclusion
LPP term insurance plans are buyer-friendly and come with several benefits to keep your financial position intact. If you haven’t yet purchased a term insurance cover, the Bajaj Allianz Life Smart Protect Goal- A Non Linked, Non Participating, Pure Life Term Insurance Plan could be the go-to, comprehensive term insurance plan which comes with several premium payment options such as single premium, LPP, regular premium payment, and features such as return of premium [4], and more, including the option for additional riders. [1] Bajaj Allianz Life Smart Protect Goal – A Non Linked, Non-participating, Pure Life Term Insurance Plan offers you a 3 percent discount on online purchase. [2] The premium is as low as Rs 21 per day for Rs 1 Crore term cover [3] and offers protection against 55 critical illnesses [4]. It also comes with a child education cover. [4]

Buying a term insurance for adequate coverage will be your best gesture towards your loved ones. It will ensure that your family’s life goals remain on track. It’s time to shed off procrastination and buy a term insurance plan today, right from the comfort of your home!

 

References-

[1] Get multiple add-ons covers

[2] Discount is available for regular premium and limited premium payment frequency under all variants of this product.

[3] Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.

[4] Product feature/benefit mentioned above are dependent on variant

BJAZ-WEB-IC-00928/21

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