What is Limited Pay vs Regular Pay in Term Insurance?

What is a Premium Payment Mode?

What is the Difference Between Regular Pay and Limited Pay Term Insurance?

There are some major differences between a regular pay insurance and a limited pay insurance. Let’s have a look:

Point of Difference

Regular Pay

Limited Pay

Premium Payment Duration

For the entire term of the policy.

Fixed premium payments for a shorter and limited duration, much lesser than the tenure of the policy.

Coverage

The premium payment term and policy term is equal. Hence coverage continues if the premiums are paid.

The coverage continues after the limited premium payment term, to complete the policy tenure.

Advantage of Duration

Provides the advantage of completing the premium payment liability within a short duration.

Provides the advantage of spreading the cost over a longer tenure, thus aligning it with the budget.

Total Cost

The overall cost in regular pay is higher since it is spread over a longer duration.

The overall cost in limited pay tends to be lower since the premiums are paid in advance within a short duration.

Per Premium Amount

Higher premium amount per pay because of limited payments.

Lower premium amount per pay since the instalments are spread out over a longer duration.

Tax Benefit

Tax Benefit on the premium paid, under section 80C is distributed across the total policy tenure.

Tax Benefit on premium, under 80C is maximised for the limited number of years when the premium is paid.

How to Choose the Right Premium Payment Option?

Frequently Asked Questions

Does the Choice Between Regular Pay and Limited Pay Affect the Life Cover? up-arrow

No. Regardless of the premium payment mode, the life cover remains constant.

Is there Any Flexibility Advantage in Choosing Limited Pay Over Regular Pay? up-arrow

Yes. Limited pay offers shorter duration of premium payments, thus completing the liability and providing financial freedom sooner.