The most crucial factor in life insurance is the premium. The premium for the policy term determines the sum assured and the maturity benefits you receive from a savings insurance policy. There are different types of premium payment options available in the market. Therefore, you must understand the different options and their benefits to choosing the apt premium payment mode for your long-term savings plan. Choosing the right mode is essential to feel financially comfortable and invested long-term. So, here is a detail explaining the life insurance premium payment options for your reference.
 

Before we get started, let us have an overview of what premium in a life insurance plan means.
 

What is Premium in a Life Insurance Plan?
 

The premium in a life insurance plan is the product cost you are liable to pay the insurer for the benefits extended in the policy. For example, the insurance provider will agree to provide a lump sum death benefit to your family in the event of your unexpected death during the policy term, and the cost for such benefits is the premium. In a life insurance plan with savings benefit, the premium is slightly more owing to the death benefit and the guaranteed¹ returns provided as the maturity benefit.
 

There are different life insurance premium payment options. Here is a detail explaining the differences and the benefits.
 

Insurance Premium Payment Options
 

Insurers provide a few premium payment options. You can decide on the best option for your plan based on your current financial status and future commitments.
 

• Regular premium payment - In the regular premium payment option, you will have to make the premium payment for the savings plan throughout the policy tenure at regular intervals. It is one of the most common methods for paying insurance premiums. Here are a few benefits of the regular premium payment method:
  
  
  • If you choose to make a regular premium payment, you can pay it monthly, quarterly, semi-annually or annually. Therefore, you can decide on the option based on your steady flow of income
  • Affordable - As the cost is spread throughout the policy tenure, you can ensure to purchase the savings policy at an affordable premium.
  • Online payment insurance premium - Although making regular payments might seem difficult, online options have made it simpler. You can use the net banking facilities to pay your premiums regularly.
  • One major disadvantage of the regular premium payment option is that you tend to forget or default from making the payment considering a short-term financial constraint. Therefore, you can choose the auto-debit option if you tend to forget and an emergency fund to manage the expenses to avoid defaulting from paying the premium for the savings policy
    
    
• Single Premium Payment - In a single premium payment option, you will pay the entire cost of the life insurance savings policy one time. The single premium payment option is a less-used option for making payments. Here are a few benefits of the single premium payment option:
  
  
  • No possibility of a lapse - As you make the complete premium payment when you buy the savings plan at inception, there is no possibility of the life insurance savings plan getting lapsed due to non-payment regularly.
  • Does not affect your future financial plan - As the payment for the savings policy is made at once, it does not affect your future financial commitments in anyways. For example, if you plan to start a business and the annual premium payment affects your finances, you might experience financial stress while paying the premium every year. However, in the single premium payment method, as the payment is already made, the life insurance saving may not pose significant financial pressure at any time.
  • One downside of the single premium payment option is costly due to the consideration of the inflation rate. Therefore, it is suitable for retired people who want to invest a portion of their retirement corpus for their family's financial security.
    
    
• Limited premium payment - In a limited premium payment option, you will pay the premium for a limited term for the long-term savings plan and, however, ensure the benefits based on the policy tenure. For example, suppose the savings policy is for 15 years. In that case, you can pay the premium for 5 or 7 years and ensure the maturity benefit at the end of the 15 years term and the death benefit for your family anytime during the 15 years term. Here are a few benefits of the limited insurance premium payment options:
  
  
  • Difficulty managing finances in the short term - If the premium payment is for the short term, the financial burden gets nil later during the policy tenure while there is no compromise on the life insurance and savings benefit.
  • People can plan early retirement - It is the apt life insurance premium option for people planning to retire early and who want the savings plan active while not paying the premium anymore.
     

When you purchase our plan, you can find all three payment options for the savings insurance plan. You can choose the right option based on your current financial income and future personal and family commitments. For example, suppose you are a salaried person in a government establishment. In that case, you can pay the premium regularly as you are certain of having a regular source of income. On the other hand, considering your health complications, the limited or single premium payment methods are suitable if you plan to retire early.
 

Conclusion
 

Insurance premium payment is important to ensure the timely benefits from your life insurance plan. Insurance providers have offered various flexible features to customise the savings insurance plan to your advantage. One such option is the premium payment option. There are regular, single and limited premium payment options. You can pay the premium regularly through the policy tenure, make a single payment during inception or for a limited term of the policy tenure based on your financial commitments. Analyse your personal finances and make the right choice!

 

L&C/Advt/2022/Nov/3031