Limited Pay : 

Limited pay Term insurance refers to a premium payment structure where the policyholder pays premiums for a limited number of years, rather than for the entire duration of the policy. This means that the insured can enjoy coverage for a specified term while only having to make payments for a shorter period and get some discount.

Regular Pay : 

Regular pay Term insurance typically means that the policyholder pays premiums at consistent intervals, such as monthly, quarterly, semi-annually, or annually till the cover age. This regular payment schedule helps ensure that the policy remains active and provides coverage for the specified term.

Limited Pay vs Regular Pay: Which one is better?

Let say Mr. A is 30 years old and wants to take a Term Insurance policy for Rs. 2 Cr till Age : 60 (check Term Insurance Calculator to know the coverage required)

A Tata AIA Maha Raksha Supreme Scheme Term Plan would cost the below ( as on Dec'24)

Premiums:

Limited Pay (One Time) : Rs. 3,39,382 

Limited Pay (5 Years) : Rs. 63,054

Regular Pay (Yearly) : Rs. 16,863

Present Value of the Premiums at 10% discount: (essentially considers the time value of the money, lower the present value lesser the burden on you)

Limited Pay (One Time) : Rs. 3,39,382

Limited Pay (5 Years) : Rs. 2,62,927

Regular Pay (Yearly) : Rs. 1,74,863

Excel Workings :  

Summary : So if we look at the present value of the future premium payments to insurance firm. For the same insurance cover of Rs. 2 Cr, It is better go for Regular Pay as it clearly says Regular Pay (Rs. 1,74, 863) would cost way less than Limited pay options. 

Say Mr. A has 3,39,382 liquid cash available then he is better off choosing the Regular Pay and invest the remaining money in any investment (FD, MF, Stocks, Gold) as per his risk appetite. He can choose to withdraw Rs. 16,863 every year from his investment, he would still be left with Rs. 8,21,559 at the age of 60 (Assuming 10% yearly return)

#walkthetalk : I have personally taken Max Life Smart Total Elite Protection Term Plan for Regular Pay (yearly) till age 70 (suggested to have till 60 years)

Thanks,

Honvest Team.