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What is Limited Pay Term Plan and its Benefits?

Jul 20, 2020 | 3 weeks ago | Read Time: 3 minutes | By iKnowledge Team
Limited Pay Term Plan
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The classic approach of ‘one-size-fits-all’ has been revised over the years to fit the needs of the changing generation. Today, consumers demand products and services that solve their individual purpose and are customized to their needs. The insurance sector, in this case, is no exception.

Everyone looking to buy insurance aims to have premiums, term, features, and coverage, as per their custom requirements. One such plan, which can be structured to suit the preferences of the insurer, is known as a limited pay term plan.

What is Meant by Limited pay Term Insurance?

Limited pay is a type of autonomy provided to the insured, allowing him/her to choose a specific period (5, 10, 15, or more years) for paying premiums. In the time following the expiry of the precise duration, the insured is not liable to pay any dues to the insurance company. The premium-paying term is usually lower than the complete policy term, thus, enhancing the flexibility of the insurers.

For example, Suresh buys a term cover for 20 years. Since he is in his peak working years, he wants to pay off all dues within 10 years from the plan initiation. In this case, the adjusted premium amount will be paid in the 10 specified years, while the cover will last for the entire term policy duration, i.e. 20 years.

Generally, life insurance policies require the individual to pay dues for the entire policy duration. In such cases, the term of the plan is equal to the premium paying duration. However, in case of a limited pay term plan, after the expiry of the premium duration, the policy is classified as a fully-paid plan.  The insured gets complete coverage for the entire duration, irrespective of the premium period.

This is greatly beneficial for insurers who have a fluctuating monetary situation, flexible incomes, unpredictable working environments, or are nearing retirement.

What are the Benefits of Limited Pay Insurance?

A limited pay term plan owes its popularity to the flexibility and customization it offers to the insured. Some of its key benefits include:

  • Comprehensive coverage for the entire policy duration, despite a limited timeframe.
  • No complexity of multi-year premium commitments.
  • Financial burden centered in the desired duration.
  • No risk of missing out maturity benefits or related advantages. All proposed benefits are provided, irrespective of the restricted payment period.
  • No loss due to non-payment of premium. The policyholder can surrender the plan and earn an adjusted value.
  • Fewer chances of policy lapse due to a shorter liability duration. Hence, the chances of missing out payments are lesser.
  • Lasting coverage duration than normal plans.
  • Maximized tax deductions up to ₹1.5 lakh* under Section 80C of the Income Tax Act, 1961.

How to save on premium with limited pay insurance?

Generally, all insurance companies charge a higher premium with increasing age. Hence, for people who purchase now and keep paying premiums for the entire term or for those that purchase at a later age, the premiums advance with age. However, in the case of the latter, the impact is more strained.

For a limited pay term plan, the policy offers extensive coverage even though the premiums are limited. This helps to evade the inflated costs in the future and helps save a substantial amount.

What is the limited pay option in Aegon Life iTerm plan?

Aegon Life’s iTerm plan is one of the most economical and flexible protection plans available in the market. The policy provides extended coverage up to 100 years, along with three different payout options, as per specific need. Moreover, the iTerm plan offers premium flexibility through limited pay or single-pay options to fit every pocket. The premium payment frequency can also be customized to be monthly, quarterly or semi-annually.

Additionally, the plan has multiple add-ons, including critical illness cover for more than 36 diseases up to the age of 80. The policy also covers COVID-19 insurance claims.

FAQs

Why should one opt for Aegon Life iTerm plan?
Aegon’s iTerm plan provides comprehensive coverage up to 100 years, including critical illness rider, at economical cost. It offers premium flexibility through regular and limited pay options. It also has three payout streams, to suit the needs of the policyholder. Further, the plan covers COVID-19 insurance claims.

What if the insured is not happy with the plan?
In case, the insured is not happy with the plan, Aegon Life allows the policyholder to inform the company within 30 days from the Risk Commencement Date, as specified in the Certificate of Insurance. Aegon will refund the premiums paid after deducting a proportionate risk premium for the policy period.

What is the claim process?
The insured or the nominee can notify Aegon Life at 1800-209-9090 or send an email to group.care@aegonlife.com, along with the supporting documents to file for a claim.

Can the insured make changes to the policy terms after purchase?
Once purchased, no changes can be made to the cover amount, payout options, payment term, and premium payment frequency. Kindly refer the policy document for more details.


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