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Different Types of Premiums in Term Insurance?

Regular, limited, and single premium pay are different types of premiums in term insurance. Learn different types of premiums in term insurance and choose the best that suits you.

  • Nov 15, 2021

The premium you pay for your term plan can be one of the significant factors determining whether you opt for a specific plan or not, and the frequency of paying the premium is also something that influences the decision. Therefore, you will also be required to choose a Premium payment frequency while selecting your policy. While many options are available for term insurance premium payment, it’s essential first to understand how these payment structures work. Here are some of the types of premiums in term insurance.

Regular Premium Pay

Regular premium payment is the option we think of, typically, when considering premium payment options. Under this mode of payment, you are expected to pay the premium throughout the policy term at regular intervals, monthly, quarterly, half-yearly, or annually. Therefore, regular pay is suitable for people with a steady income flow.

Limited Premium Pay

Limited premium pay allows you to make premium payments for a shorter duration within the term. For example, if you take a term policy for 20 years, you will have the option to pay for the first five years at a regular interval. Within these five years, you will attain the premium, and you can enjoy the next 15 years of the policy without making any payments.

Single Premium Pay

A single premium term plan is where you can pay the premium as a lump sum at the beginning of the policy. Unlike a regular premium plan, where you have to pay the premium at a set interval, a single premium policy is a one-time investment. Once the payment is made in a single premium plan, the policy is valid until the end of the term chosen without any further payments. Therefore, it is usually observed that the premium paid in a single premium policy is lower than that of a regular payment plan.

The Level Term or Level-Premium Policy

These provide security for a period of 10 to 30 years. Since actuaries must account for the rising costs of insurance over the duration of the policy’s effectiveness, this type of premium is relatively more expensive than that of annual renewable term life insurance.

The Yearly Renewable Term (YRT) Policy

Plans that renew annually without requiring evidence of insurability are known as annually renewable term (YRT) plans.

The premiums increase each year as the insured person ages. There is no predetermined term, but the premiums could grow too expensive as the policyholder ages, making the policy.

The Decreasing Term Policy

The death benefit of these plans decreases annually in accordance with a predetermined timetable. For the length of the insurance, the policyholder pays a constant, flat premium.

Mortgages and decreasing term policies are frequently used together, with the policyholder matching the insurance payout to the decreasing principle of the mortgage.

Can insurance premiums be prepaid?

A type of insurance known as prepaid insurance is one in which the premium is paid in full far in advance of the coverage period.

  • A prepaid insurance policy’s premium is paid before the start of the coverage.
  • Typically, the premium is only due for one year. However, you can purchase insurance for a period longer than a year by paying a single price.
  • A single premium can be paid for long-term life insurance policies.
  • The renewal premium is the amount you pay to keep your insurance policy active. For the insurance with the regular premium payment option, you must pay renewal premiums.
  • You have the option of making monthly, quarterly, half-yearly, or annual payments for the normal premium.

Which Options Suit You the Best?

Now that you know a single premium policy, you may ask if a one-time investment plan is suitable for you or if you should opt for a regular or limited premium mode. Let us find out.

Investing in a single premium term plan is advisable if you have an irregular income or have a considerable amount of money to invest. Investment in a single premium plan is also a good option if you do not want to engage with a long-term payment option. In addition, hassle-free tenure is one of the most significant advantages of a single premium policy. If you wonder what the premium would be like, you can get an estimate using the single premium policy calculator. All you need to do is enter a few details you will be asked for, and the single premium policy calculator will do the rest! However, a regular payment mode is recommended for salaried individuals with a family to take care of. You should opt for a limited pay method if you have short career spans like sportspersons, work in unpredictable environments, or nearing retirement age and require coverage for a higher age bracket.

It is crucial to pick the proper specifications when buying a term policy, so it is essential to have all the knowledge and then make an informed decision. Then, you can choose the premium payment mode right for you and enjoy the benefits of a term plan at your convenience.

Kotak e-Term

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  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**

Ref. No. KLI/22-23/E-BB/2435


- A Consumer Education Initiative series by Kotak Life

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