A single premium policy is a type of life insurance policy wherein a lump sum is paid as premium instead of the yearly, quarterly or monthly form of premium payment. In other words, single premium insurance allows you to pay a premium amount for an insurance cover at one-go. However, a single premium life insurance policy could be convenient for many, it may not for several others.
Before we understand that in what scenarios does buying a single premium insurance plan benefit an investor, let us first know the benefits of single premium policies:
When you pay a premium amount for an insurance cover at one-go, the insurance companies reward you in the form of discounts on the total premium payable. A single premium policy, thus, reduces your total premium outgo compared to regular premium payments.
No need to remember premium dates
With a single premium policy you avoid any risk of non-payment by paying the entire premium price of the insurance plan in one go. Now, you don’t have to worry about paying penalties or setting reminders for insurance. Unlike in the yearly, quarterly or monthly form of premium payment, you don't have to worry about the budget, balance in the bank account or earnings every time the premium is due.
Tax benefits on maturity
When you buy a single premium policy, you get entitled to avail two tax benefits per the applicable provisions of the Income Tax* Act, 1961. Under section 80C, you get to claim the premiums paid by you towards the single premium policy. Also, the maturity and death benefit you receive from single premium life plans will also be exempt from tax* deductions under section 10(10D) of the Act.
Who should buy single premium life insurance?
People with an unsteady or irregular income, self-employed individuals and freelancers opt for single premium life plans. Also, the professionals who are unsure about when their next paycheck or profit will come and have a large amount of money to spare can also opt for a single premium insurance policy. Those who also make a sudden profit in their business or from a pre-existing investment can also buy a single premium policy.
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