What are the Different Types of Premium in Term Insurance

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Different Types of Premium in Term Insurance

Term Insurance Quote
  • 15th Nov 2021
  • 1,007

Different Types of Premium in Term Insurance

The premium that 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. Premium payment frequency is also something you will be required to choose while selecting your policy. While there are many options available for term insurance premium payment, it’s important to first understand how these payment structures work.

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 who have a steady flow of income.

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, the premium will be attained, and you can enjoy the next 15 years of the policy without having to make any payments.

Single Premium Pay

A single premium term plan is where you can pay the premium as a lump sum at the very 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 plan. Once the payment is made in a single premium plan, the policy is valid till the end of the term chosen without any further payments to be made. Therefore, it is usually observed that the premium paid in a single premium policy is lower than that of a regular payment plan.

Which Options Suit You the Best?

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

It is advisable to invest in a single premium term plan if you have an irregular income or have a considerable amount of money with you 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, having a 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 that 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 who have 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. You can choose the premium payment mode that is right for you and enjoy the benefits of a term plan at your convenience.

- A Consumer Education Initiative series by Kotak Life

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