Written by
Alok Mishra
Insurance Writer
Alok Mishra is a Digital and Content Marketing specialist with 10 years of experience. He has spearheaded Web Content, Social Media & Branding, and Community Building initiatives to drive growth for prominent brands.
Reviewed by
Bhaskar Sinha
Insurance Expert
8+ years of experience in Life Insurance with expertise in Developing Life and Health Products, Digital Sales, Conducting effective trainings and Key Account Management.
As the policyholder, it is essential to evaluate limited pay vs regular pay to make an informed decision while choosing a premium payment option while buying life insurance plan.
Limited pay premium payment option allows you to only pay the premiums for a specific duration of the policy tenure. You can choose to pay off the premiums well before the policy tenure ends.
However, this does not affect the coverage period of the insurance policy. You will get life cover for the entire policy tenure, irrespective of the premium payment period.
Let us consider an example to understand limited pay vs regular pay –
Mr. Kumar, a 35 years old male, has opted for a life insurance plan with a policy period of 30 years. He wants to pay all his premium liabilities before his retirement, at the age of 55. Therefore, if he chooses a limited premium payment option for his insurance plan, he can pay off the premiums in the next 10 or 20 years, as it suits him.
As the name suggests, regular pay premium payment option works for most insurance policies. The policyholders are required to pay the premiums throughout the policy tenure to enjoy life coverage.
The duration of the premium payment is equal to the term of the policy.
Considering the same example above can help you understand how regular pay option is different from limited pay –
If Mr. Kumar has purchased a life insurance policy that offers life coverage for 20 years, his premiums will be spread over the entire period. The regular premium payment plan might be favorable for individuals with a steady income source.
Every earning individual has different requirements out of his insurance plan. It is heavily dependent on their specific financial profile. Hence, you must calculate term insurance coverage for your family to make a sound financial plan. The limited pay vs. regular pay evaluation will help figure out which works best in optimizing the benefit for an individual.
When you consider limited pay vs regular pay options, it is helpful to recognize the benefits particular to your requirements. Let’s look at the comparison between limited pay and regular pay to have a comprehensive understanding.
Limited Pay | Regular Pay |
You can choose to pay the premium for a limited period | You pay life insurance premium throughout the policy term. |
Life coverage lasts for the entire policy term, notwithstanding the premium payment duration. | Life coverage lasts for an equal time as the premium payment period. |
Premium amount may be higher since it is constricted to a shorter period. | Premium amounts are spread over the policy tenure, making them lower. |
The chances of policy lapse are lower since premiums are payable only for a specific period. | The chances of policy lapse are higher since the premiums are payable for a more extended period. |
Tax Benefits can be maximized since the premium amount is higher. | Tax Benefits are spread across the years of the policy term. |
When it comes to the premium payment option, the choice between limited pay vs regular pay depends on several factors. It is subject to the particular benefits of term insurance that an individual requires out of the insurance plan. It is not necessary that one option will be suitable for every individual. Here are some of the factors that will help you decide between limited pay vs regular pay:
Now that we have reviewed limited pay vs regular pay in detail, let us look at some other essential things about life insurance premiums:
1. Life insurance companies offer different premium payment options according to the frequency as well. You can choose to pay the premium monthly, quarterly, half-yearly, or yearly, depending on terms of the selected plan
2. Premiums are payable in advance through online payment methods or cheque or DD
3. Insurers assess the risk profile of the policyholder carefully before arriving at the cost of the premium. It may include medical examinations, , ,disclosure of smoking habits and many other factors.
4. Under Section 80C of the Income Tax Act 1961, you can avail tax benefits on the premium paid towards life insurance plans
ARN No: Sept21/Bg/09B
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