Life insurance plans offer many benefits to buyers and the main benefit of these plans is that the policy holder’s family receives financial assistance in the form of a compensation amount from the insurance company when the policy holder passes away. In return for the benefits offered by the insurance company, the policy holder has to pay premiums periodically.
People who want to buy insurance plans are given various options to help them pay premiums with ease. Buyers can choose if they want to pay the premiums every month or every year and a few companies also allow buyers to pay premiums on a chosen day every month. Buyers are also given 2 premium payment options and usually the payment option selected depends on the tenure of the policy.
Levelled payments allow people to pay a fixed amount every month or year for majority tenure of the policy after which the buyer has to pay stepped payments for the last few years. Levelled payments are usually better for people who plan to take a policy for 15 years or more since this allows them to pay a fixed amount every month or year.
Stepped premiums on the other hand allow people to benefit from the initial low interest or premium rates. Stepped payment is usually better for people who want to take short term policies such as for 10 years or lesser. Stepped payments are usually not the preferred choice for long term policies since the premiums keep increasing as the buyer gets older and this is usually a problem for people who are retired.
Some insurance companies offer a third and unique premium payment option to buyers. This premium is known as blended premium plan, and is suitable for people who want to enjoy the benefits of both levelled and stepped premium plans. Usually insurance companies that offer this unique option, offer better plans that cost a little more than regular plans.
Before choosing a life insurance premium plan, buyers should understand their own financially situation and needs first. Life cover plans are extremely useful and have many benefits however if a policy holder misses one or more payments then the policy will be cancelled and he will not be able to enjoy any of the benefits offered.
Buyers who are not sure which premium plan to opt for should either consult with an insurance broker or should talk to a financial advisor first.