Over the years, term insurance has evolved significantly. Today, insurance companies in India offer a variety of term plans to suit the different needs of buyers. One such type of term insurance policy that has gained immense popularity, particularly among self-employed individuals, is term insurance with limited payment options.
Let’s know more about this plan and its benefits to self-employed policy buyers.
What is term insurance with limited pay options?
As the name suggests, a term insurance policy with a limited pay option allows you to enjoy the policy benefits for the entire term you choose initially, even though you pay the premium for a limited period. In term insurance with limited payment options, the coverage period is more than the period for which you pay the premium.
Let us understand the working of this policy with an example.
Miss. Shelly is a 30-year-old entrepreneur; she owns a small start-up. She purchased a term insurance policy with a limited pay option for 20 years. She knows that there is always a risk of uncertain income in her business, so she wants to pay off the term insurance within ten years of buying the policy.
In such a situation, she can pay the premium only for ten years but enjoy the coverage and other policy benefits for a full 20 years.
Now that you know what term insurance with limited options is and how it works, it would help to know its benefits for the self-employed.
· Shorter premium payment period
As discussed above, the obvious benefit of buying a term insurance policy with a limited pay option for self-employed is that you need not pay the premium for the policy period to keep the policy active. You can choose to pay the entire premium within a shorter tenure and decide the premium payment period while buying the policy according to your financial capacity and budget. Once you pay off the full premium, you can enjoy the coverage until the end of the policy tenure.
· Minimal risk of policy lapse
As a self-employed individual, you may have an unstable income. So, there is always a risk of term insurance policy lapse if you are not able to pay the premium on time. This is where term insurance with limited pay options is highly beneficial.
With this option, you need not worry about losing the policy coverage because you must pay the premium only for a limited period.
· Tax benefits
Another significant buying of a term insurance policy with a limited pay option is getting a tax deduction of up to ₹1.5 lakh every year under Section 80C of the Indian Income Tax Act.
· Best suited for individuals with a shorter career
If you are in a specific profession like freelancing, you may have a shorter career span than others. However, you may still need a term insurance cover for your life to secure your family’s future. A term plan with a limited pay option may suit you as you need not pay a regular premium.
Now that you are aware of the benefits of term insurance with limited payment options for self-employed do your due diligence and choose the right term plan to get maximum benefit from it.