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Limited Pay v/s Regular Pay

Jul 22, 2020 | 3 weeks ago | Read Time: 3 minutes | By iKnowledge Team

When purchasing an insurance policy, among all other considerations, the mode of premium payment is a critical factor. Typically, there are two ways to pay a policy premium – limited and regular. Each type has its benefits and drawbacks. The choice depends on multiple aspects, including the current financial situation, existing liabilities, expected future income, retirement plans, etc. Before making the final choice between limited and regular pay term plan, it is vital to understand each in detail.

limiited pay v/s regular pay

Limited Pay

In a limited pay plan, the policyholder pays premium only for a specific pre-agreed duration. However, the insured gets full coverage for the entire policy term, irrespective of the premium payment period. Post the expiry of the precise payment tenure, the insured is not liable to pay any dues. In a limited pay option, the term of the policy is longer than the premium payment term.

For example, X, age 40, buys a term plan for 20 years, with a limited pay option. He expects to retire at the age of 55 years and hence, wants to pay off all dues in the 10 years from now. In this case, X will be liable for premiums only till the age of 50 years, post which there is no need for any payment. However, the policy coverage will continue for the entire 20 years.

Regular Pay

A regular pay term plan is ordinary insurance, where the insured pays premiums for the entire length of the policy and enjoys the coverage throughout. In such a plan, the duration of the premium payment and the term of the policy are equivalent.

For example, X, age 40, buys a regular pay term plan for 20 years. In this case, X will pay premiums for the entire policy interval and will also enjoy coverage for 20 years.

Difference between Limited Pay & Regular Pay

Following is the direct comparison between Limited Pay & Regular Pay:

Limited Pay Term PlanRegular Pay Term Plan
Defined and shorter premium-paying lengthLonger premium payments that cover the entire plan duration
Comprehensive coverage irrespective of limited premium timeFull coverage for the entire policy tenure
Lesser chances of policy lapse because of shorter disbursement timeHigher chances of policy lapse due to payment default
No loss due to non-payment, as the policyholder can surrender the plan and get an adjusted valueNo benefit is paid upon the lapse of the policy because of the evasion of premium
No complexity of multi-year premium payoutsComparatively higher complexity due to monthly, semi-annual or annual costs
Financial burden centred in a specific periodFinancial load spread across the entire policy term
Premiums are adjusted to be paid in a timeframe and hence, do not increase with agePremiums rise with age
Potential to save 55% in premiums because of advance paymentsNo discount or rewards earned for premiums paid
Payments end within a stipulated time and do not extend beyond retirementExpenses can continue even after retirement
Limited dues help policyholders to gain maximum coverage possibleRegular dues, increasing with age, restrict the coverage because of the continued financial burden
Potential to maximize tax benefits under Section 80C of the Income Tax Act, 1961Tax benefits are split across years and offer only limited deductions

 How to Choose Between the Two

The choice between limited pay v/s regular pay is subjective to a person. What might be perfect for a particular situation might not provide the same benefits in another. Hence, the selection depends on the individual financial condition.

Typically, a limited pay plan is suitable for individuals that have the following conditions:

  • A limited career span – sportspersons, actors, etc.
  • Fluctuating monetary situations – people working on commissions, bonuses, etc.
  • Flexible incomes – self-employed individuals.
  • Unpredictable working environments – army personnel.
  • Impending retirement in a few years
  • Need for uncomplicated plans with convenient payouts.

On the other hand, a regular pay term plan is suitable for the following people:

  • Individuals with fixed sources of income – salaried individuals, etc.
  • People that want affordable premiums spread across a longer term.
  • Policyholders that are disciplined in premium payments.
  • Individuals who want to spread their tax benefits across years to gain other investment advantages.
  • People who have just started working and/or are far from their retirement age.

Limited pay plan option in Aegon Life iTerm

Aegon Life’s iTerm plan offers limited pay option to assure convenience to the insured. The payment frequency can also be customized monthly, quarterly or semi-annually.

The policy provides extensive coverage at economical premiums and flexible payment and payout terms, to suit the policyholder. The plan can extend up to 100 years, including riders such as critical illness covers. Aegon’s iTerm insurance also entertains COVID-19 claims to offer stability in such uncertain times.


Both premium payment methods – limited pay v/s regular pay have their specific pros and cons. The suitability depends on the monetary condition, preference of the insured and the financial plan in place. The final choice should be based on a comprehensive evaluation of the present and the future financial conditions and requirements.


iTerm Plan

Life Insurance Plan with 3 Options to Choose from

  • Life Protect (Life cover till age 100 years)
  • Protect Plus (5% Automatic Increase of life cover)
  • Dual Protect (Protection + Regular Income)
iTerm Plus Plan

Life Insurance Plan with 4 Options to Choose from

  • Life Plan
  • Life Plus Plan
  • Life & Health Plan (10 Critical Illnesses covered)
  • Life & Health Plus Plan (36 Critical Illnesses covered)
iInvest Plan

iInvest Plan with 3 Options to Choose from

  • Increases Your Investment
  • Boost Your Fund Value
  • Withdraw Your Investment
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