What are the Benefits of a Limited Pay Term Plan?

9-July-2021 |

The success of a financial product is essentially based on the extent of customization it can afford. It is primarily because the policy seekers have a different financial background based on their income, career and financial commitments. A term plan can also be tailor-made based on your requirements. Insurers have become extremely competitive in this regard. You can choose the plan based on your requirements concerning the sum assured, policy duration, and premium payment flexibility. Here, we will discuss how a term plan differs in the premium payment mode and how beneficial it is in the long run.


What is a term plan?

A term insurance plan is a traditional pure life insurance plan that serves the basic need to provide life coverage. The sum assured is paid to the nominee in case of your unexpected demise during the policy term. You can pay the premium for the plan differently based on your comfort levels and a steady flow income.


What are the different types of term plans?

There are basically three types of term insurance plans based on the premium payment mode:


  1. Regular pay - In a regular pay mode, you have to make the premium payment regularly over a fixed interval of time. You can pay it monthly, quarterly, half-yearly or yearly throughout the chosen policy term. 

  2. Limited pay - In a term plan with a limited pay option, you can choose a limited term within the policy duration for paying your premium amounts. For example, you can hold the term insurance policy for twenty years while paying only for the first ten years to ensure the life cover.

  3. Single pay - In a single pay term plan, you invest in the policy with a lump sum amount for a set policy duration.



Based on your financial status, income, short-term and long-term financial goals, and comfort levels, you can determine the premium payment mode and buy term insurance.


Many people choose a limited pay term plan for the different types of benefits it offers. TATA AIA term insurance provides reliable term insurance products to serve your financial requirements in the best possible manner. 


What are the benefits of a limited pay term plan?

Term insurance with limited pay helps you acquire a longer life coverage by reducing the payment burden to a shorter duration. Here are a few benefits derived out of this plan:


  1. Shorter payment period - You get to enjoy a shorter premium payment duration for a longer policy term and life coverage. With adequate planning based on your income, you can choose the period for payment as long as you are in your employment phase. However, you can extend the policy term during your retirement phase without paying for it. It is a comprehensive, pre-decided term plan for all your financial needs. 

    Even if you are compelled to pay during the limited time frame, you enjoy the complete plan benefits that are worthwhile. Also, though the burden is centred for a specific time, the duration is decided and customized at your end.   


  3. Reduces the risk of a policy lapse - Many times, it is common that you take a life insurance plan without adequate planning and fail to pay the premium throughout the period for ensuring the benefits due to unexpected financial commitments. In the case of a limited pay term plan, as the payment term is short, you can reduce the chances of such discrepancies for getting the product benefits. 


  5. Increased tax* benefits - With a term insurance plan with a limited payment period, the annual premium for the plan increases naturally. Compared to the regular pay option, the premium cost is higher. As the premium amount gets higher annually, the amount of tax* deduction under Section 80C of the Income Tax act can be increased, allowing for up to Rs 1.5 lakhs per annum. However, while making such a claim, check and calculate the other savings and investment options chosen to comply with the regulations.


  7. Plan for a high sum assured - If you plan to purchase a term plan early, the premium amount will be relatively less due to the reduced probability of death risk when you are young. Also, as the extent of financial commitments at this age is less, you can contribute a higher amount for the term plan. You can purchase and complete the necessary payments before you get married and set for other long term financial goals. It helps you ensure a high sum assured by making a definite financial plan with adequate insurance, investments and savings options for your entire life with ease.



Who can avail of the limited pay term plan to the full advantage?

A limited pay term insurance plan is ideal for a specific type of people who can use it maximally for real-life scenarios.


  1. Short career - If you are a sportsman or an artist in the film industry, the career is generally short-lived. Thus, the income is also restricted to a specific duration.

  2. Unpredictable working environment - If you are working with a company that does not have a strong foundation and cannot withstand certain economic developments in the long run.

  3. Business professionals - If you are new to business making and the income is not consistent.

  4. Retirement - If you are a person nearing the retirement age, you can choose to pay till the retirement phase and enjoy the benefits throughout life. 


Term insurance plans have become an ultimate necessity concerning uncertain life events. You must plan for the purchase early to protect your family's financial needs. However, you have the leverage to choose the product based on your convenience. The limited pay term plan is one such option. Even with a restricted payment term, you have the leverage to get all the insurance benefits ensured during the policy term. Choose the best insurer with a fair term insurance claim settlement ratio. You can enjoy a longer risk coverage while paying for a short while with the limited pay term plan! 



Need help to choose the right plan?


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  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • * Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.