What Is a Passive Income? Why Should You Use It to Buy a Term Plan?

A term plan is a type of life insurance policy that offers coverage for a fixed period or term. The beneficiary receives a lump payment as the death benefit if the insured dies during the term. A term plan is a pure protection plan that offers a high coverage amount at a low premium rate. Now, this is all about “What is a term plan? But did you know you can pay the term plan low premium without affecting your primary income? Wondering how? The answer is passive income.

What is Passive Income?

Passive income is money you earn regularly with minimal or no effort and does not come from an employer or contractor. It is the opposite of active income, which you receive from a job or business venture that requires active participation. Passive income can provide many benefits, such as expanding your wealth, securing your retirement, and creating a backup plan if you lose your primary source of income.

Sources of Passive Income

Passive income can come from multiple sources. These include:

Rental Property

If you have a spare apartment or commercial space, you can generate a good income by renting it out. However, you should invest some time and money in property maintenance to earn decent rent.

Dividend Stocks

You can park your savings in stocks that pay dividends. Dividends are regular payments to shareholders from the company’s profits. You can reinvest the dividends to purchase more shares or use them as a source of income. Before investing, conduct research and analysis to select the best stocks for your portfolio.

Interest Income

Do you have idle cash lying around in your home’s locker? If so, consider investing in fixed income or bonds with minimal risk but handsome returns. A bond is an instrument a corporation or government issues to raise funds for a specific project. Bonds are typically long-term investments.


You can earn royalties from creating and selling intellectual property, such as books, music, art, or software. However, before that, you may need to invest much time and effort to create the product. Once sold, you can earn passive income from each sale or license.

Affiliate Marketing

This type of service can help you earn commissions by promoting other people’s or companies’ products or services on your own social media, website, blog, or other platforms. In order to do this, you may need to create well-researched, high-quality content and attract a large audience to generate traffic and sales.

How Can I Use Passive Income to Pay Term Plan Premiums?

Having understood the types of passive income, let’s understand what is term plan. It is a type of life insurance policy that offers financial compensation to your loved ones, in case of an unfortunate event. If the insured person passes away during the policy term, the death benefit is paid out to the beneficiaries. The convenience of buying term plans online is indisputable. You can buy a term plan online with passive income and enjoy multiple perks. Let’s understand how.

  • Passive income can reduce your dependency on your regular income. As mentioned earlier, if you have a passive income source that generates enough money to cover your term plan premiums, you can use it for payment without affecting your regular income or savings. This approach allows you to preserve your steady income or savings for other purposes, such as investing, spending, or emergencies.
  • This income can help you increase your coverage amount. Term plans are usually cheaper than other types of life insurance, but they still require you to pay a premium based on your age, health, and coverage amount. If you have a passive income source that grows over time, you can use it to increase your coverage amount and get more protection for your family. This way, you can ensure that your family will receive enough money to maintain their lifestyle and fulfill their dreams in case of your untimely demise.
  • Passive income can help you cope with inflation and rising costs. Term plans are usually fixed for a certain period. That means the premium amount does not change during the policy term. However, the cost of living and inflation may increase over time, which means that the sum assured amount may not be sufficient to meet your family’s needs in the future. If you have a passive income source that keeps pace with inflation and rising costs, you can use it to pay for additional riders or benefits that enhance your term plan and make it more suitable for your family’s needs. For example, you can opt for a critical illness rider that covers you for various diseases or a return of premium option that refunds your premiums at the end of the policy term.


Passive income offers effortless earnings, while a term plan provides vital financial protection for your family. Combining these concepts, using passive income to cover term plan premiums is a prudent way to ensure your loved ones’ security without straining your primary income.