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What is a Single Premium Policy?

  12/1/23 12:26 PM

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  12/1/23 12:26 PM   |

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Do you need a life insurance policy but are unable to or don’t want to pay regular premiums? Then just choose a policy that requires a single premium payment! Single premium policies just need you to pay one single lumpsum payment at the very beginning of your term, and nothing after that. Once a single premium policy is purchased, you do not have to pay any further premiums and the sum assured will also be provided as life cover until the term comes to an end.   

Benefits of Single Premium Policy

One Time Pay with No Worries!
When you buy a regular or limited pay policy, you have to pay premiums on a monthly, quarterly, or annual basis. Paying premium regularly can be financially stressful for some people, plus, keeping track of where your money is being deducted can be a pain if you have multiple active policies/investments.

Single premium policies completely remove the hassle of periodic payments! With just one payment, you will receive all the benefits included in your policy until the very end of the term. This also means that there is absolutely no chance of your policy lapsing due to failure to pay premiums.

Tax Benefits Make Your Savings Easier!
Single Premium Policies are especially great if you want to save on taxes. According to Section 80C of the Income Tax Act, you can claim tax deductions of up to ₹1.5 lakhs on all premium payments for any life insurance policy. This law also applies to single premium policies. Plus, if your policy comes with maturity benefits, then you may also claim tax exemptions via Section 10(10D). Though maturity benefits are only tax exempt if your policy meets the various terms & conditions listed in Section 10(10D).

Single Premium Pay Vs Regular/Limited Pay

While single premium policies are great if you don’t want to make regular payments, there are also certain downsides that you should take into consideration.

  • High entry cost: Single pay premiums require you to pay a lumpsum amount upfront. This lumpsum amount is generally much larger than the cost of regular premiums. For example, if a plan requires regular premiums of ₹1,000 per month, then the single premium version of the same plan may require you to pay ₹50,000 or more upfront. A lumpsum premium payment may not be a good option for you if you want to save money for other investments or large purchases.
  • Sum assured may be lower: Some insurance plans offer less sum assured for single premium pay when compared to regular or limited premium pay. Always check the terms and conditions of a policy before making a purchase to ensure that the benefits provided by the plan are sufficient for you and your family in case of emergencies.
  • Less Flexible: Generally, unlike regular/limited pay policies, single premium policies do not have any surrender value. While you may be able to cancel the policy, you will probably not get back any of the money you paid as premium.

How to Choose the Right Single Premium Policy  

Nowadays, quite a few insurance plans offer single premium options at affordable rates. Now the question is, which policy is right for you. And the answer to that question is quite simple, whichever policy offers the best benefits and sum assured for the price you pay. If you prefer to make upfront payments or just don’t want to keep track of your premium payments, then a single premium policy is ideal for you. Plus, you will never have to worry about your policy lapsing.

 

Swati Tumar - Travel & Finance Writer   

Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.

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