Financial experts suggest that paying the premium for any insurance policy should not feel like a burden on the policyholder’s pockets, especially term insurance, as it is a long-term financial commitment. If you purchase a long-term policy, then you may have to pay the premium for 15 to 20 years or more. Considering such a long period, you must choose the premium payment method carefully so that you enjoy policy benefits without feeling the brunt of paying the premium.
Talking of premium payment mode in a term plan, most insurance companies offer three options. You can choose any of these options to suit your financial condition.
Regular premium payment option
This is perhaps the most popular method people choose for paying term insurance premiums. It allows you to stretch the premium payment throughout the policy tenure, and you can pay smaller amounts monthly, quarterly, half-yearly, or annually. Thus, with a regular premium payment option, you don’t feel the burden of paying a lump sum amount at once, and you can easily fit the amount into your budget.
If you are a salaried individual, then a regular premium payment method would best suit your needs. In this option, the premium amount is relatively less compared to other options. This will help you keep your insurance policy active and enjoy its benefits throughout the tenure without compromising on your regular expenses.
But you must be careful not to miss paying your premium. Make sure to set a reminder or automate the payment so that the bank debits the amount on a specific date of the month. If you miss even a single premium payment, then you may have to pay a penalty for late payment.
Limited premium payment option
Gone are the days when there were ‘one-size-fits-all’ kind of term insurance plans. Today, insurance companies offer customised term plan solutions. One such solution is a limited premium payment option.
Under this option, you can choose to pay the premium only for a limited period and yet enjoy the policy benefits for the full tenure. For example, let us assume you have purchased term insurance for 10 years, you can choose to pay the premium only for five years.
But this does not mean you pay a lesser premium. Instead, you pay the premium applicable for the full ten years in five years or whatever premium payment tenure you choose. This is an ideal premium payment method if you don’t want to carry the premium payment burden for long.
Single premium payment option
If you don’t want to have any long-term financial commitment or recurring payments, then you can choose the single premium payment option. As the name suggests, in this option, you pay the premium for the full policy duration in a single lump sum payment.
Once you pay the premium, you can enjoy the coverage and other policy benefits for the entire tenure. This is an ideal choice of premium payment method if you have a lump sum amount at the time of buying the policy. Instead of keeping the amount idle, you can put it to good use.
Also, as you pay off the full premium at once, there is no chance of policy lapse due to premium non-payment.
Now that you are aware of the different types of premium payment methods for term insurance, you can choose the one that best suits your financial condition.