"Spending a whole day looking for insurance is fun," said nobody, EVER!
"Spending a whole day looking for insurance is fun," said nobody, EVER!
  • When Should You Opt For Single Premium Plans

    Life Insurance
    • Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
    • Claim up to Rs. 1,50,000 deduction under section 80C**
    • Choose between annual and monthly premium payment options

    When you purchase a life insurance policy, you will need to pay premiums to the insurance provider in exchange for the life cover provided to you. At the time of purchasing your policy, you will be required to select the premium payment mode, i.e. the frequency of your premium payments.

    Policy buyers can, thus, choose the annual premium payment mode, bi-annual premium payment mode, quarterly premium payment mode, monthly premium payment mode, limited premium payment mode, or single premium payment mode. The premium payment modes offered to a policy buyer, however, will vary based on the policy terms and conditions.

    If you choose the annual, bi-annual, quarterly, or monthly premium payment mode, you will need to pay the premium throughout the policy tenure. In the case of limited premium payment policies, the policy buyer only has to pay the due premiums for a certain number of policy years. On the other hand, if you opt for a single premium life insurance policy, you will only have to pay the premium once before the commencement of the risk cover. Read on to know more about whether you should purchase a single premium life insurance (SPLI) policy and the factors that you should keep in mind when purchasing a SPLI policy.

    When Should You Purchase a Single Premium Life Insurance Policy?

    Single premium life insurance policies are ideal for individuals who are looking to invest a lump sum in a financial avenue. A single premium life insurance policy will help you invest your money, provide you with a comprehensive life insurance cover, and will, in turn, ensure that your money is not wasted on unnecessary expenses.

    Also, individuals with irregular and unstable incomes can invest in single premium life insurance policies when they have the required funds to purchase the policy. This will ensure that the concerned individuals will always have a life cover available, regardless of their financial situation during the policy tenure.

    Things to Consider Before Purchasing a Single Premium Life Insurance Policy

    • Cost of the Policy: Single premium life insurance policies are more expensive than regular premium payment policies. Given that you will have to pay the entire premium amount in one go, it is necessary to ensure that you have the required funds to pay for the policy.
    • Nature of Your Occupation/Job: A single premium life insurance policy is a good choice for individuals who cannot make repeated premium payments during the policy tenure. However, if you are a salaried employee who receives a fixed sum of money every month, you can very well invest in a regular premium life insurance policy and schedule the premium payments as per your requirements.
    • Tax Benefits: Many individuals with life insurance policies avail tax benefits through their policies. When you purchase a life insurance plan, you become eligible to claim tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961. For regular premium payment policies, you can claim this tax benefit on a yearly basis for the premiums that you pay to the insurer. However, in the case of single premium life insurance plans, there are certain terms and conditions with regard to the tax benefits that can be claimed. For SPLI policies, you can claim tax benefits under Section 80C only if the sum assured of your policy is at least ten times the single premium amount. Also, since you are paying the premium as a one-time amount, you can only claim the tax benefit once, up to a maximum of Rs.1.5 lakh. To claim tax benefits for the maturity proceeds under Section 10(10D), the sum assured should be 10 times the premium amount. That being said, if the life assured passes away during the policy tenure and the nominee receives the death benefit, the entire death benefit amount will be tax-free.
    • Policy Lapse: One of the key advantages of purchasing a single premium life insurance policy is that you will not have to worry about your policy getting lapsed due to non-payment of premiums. Since you would have paid the entire premium up front, you will be provided a life cover throughout the policy tenure, without you having to pay any additional amount.

    The Bottom Line

    The primary benefit of a single premium policy is that you can purchase the policy when you have the required finances and not worry about making premium payments and keeping the policy active during the policy tenure. However, given that you are paying the premium as a lump sum to the insurance company, it is all the more necessary to do your due research and make an informed choice.

    Thus, before you invest in a single premium life insurance policy, make sure to assess your financial requirements, savings and investments, and premium payment ability, among other things. If you are sure that you want to purchase a single premium life insurance policy, you should, ideally, compare a few policies that offer similar benefits and check their prices. Post this, you can invest in a single premium life insurance plan that most appeals to you.

    *The customer reviews/feedback/opinions expressed on this website are solely of their authors and do not reflect, in any way, the view of BankBazaar Insurance.

    Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.