Life insurance plans are the best investment tool for protecting the future financial needs of your beloved family. Single premium insurance plan is a one-time investment medium that is hassle-free and offers life coverage.
Nowadays, insurance companies in India are offering various types of innovative insurance products to satisfy the financial needs of their customers. One such innovative product offered by insurance companies is the Single premium life insurance plans. Life insurance policies nowadays do not necessarily mean continuous periodic payments of life insurance premium. Instead, there are single premium life insurance plan which offers similar benefits as regular premium payment plans. Let us understand in detail about investment plans offered by best single premium policies in India.
What is a Single Premium Plan?
As the name suggests, a single premium plan is a life insurance policy that offer benefits like life coverage, financial protection, and savings. These benefits under regular life insurance policies are available by paying premiums at regular periodic intervals while under single premium plans. These benefits are available by paying a one-time premium. The policy term of the single premium life insurance plans is usually similar to those of regular premium payment plans where the policyholder has to pay the premium only one time, at the time of commencement of the policy. Another important benefit that single premium plans extend is that these policies are eligible for a claim under Section 80C of the Income Tax Act, 1961 subject to fulfillment of certain terms and conditions.
Why choose Single Premium Investment Plan?
The single premium plans offered by insurance companies give multiple benefits to the life insured. These plans come in both variants namely: Traditional Plans and Unit Link Insurance Plans (ULIP). Following are the advantages of choosing a single premium investment plan:
- The life insured has to pay premium only once and get insurance coverage for the entire term of the insurance policy.
- One of the key advantages of availing single premium investment plan is that the life insured does not have to make regular premium payments.
- Investors of the single premium investment plan enjoy the features and benefits of the plan throughout the policy term as the policy does not lapse. There are no delays in the premium payment as the premium is paid at the time of commencement of the policy.
- Investors of the single premium investment plan are eligible to claim tax benefit under Section 80C of the Income Tax Act, 1961. Whether the investment plan is a traditional life insurance policy or ULIP policy, both investment plans are eligible for tax benefit (subject to certain terms and conditions). Most of the individual investors of this Investment plan opt for Single Premium Investment plan for the following reasons:
- Investors think it is hassle-free and quick as they don’t have to keep a tab on premium due dates, thus making it ideal for investors who tend to forget premium payments.
- Suitable for investors who want to invest in insurance policy when he/she has got a lump sum amount at their disposal
- Best suited insurance product for individuals who do not have a regular or steady income like businessmen, professionals, consultants, etc.
- Ideal for investors who want to make an investment in one go rather than obliging to make premium payments at regular intervals Thus, above are the positives of single premium plans. Following pointers shed light on the negatives of investing in single premium plans:
- The tax benefit under the single premium investment plan can be availed only in the FIRST policy year.
- The sum assured availed before the commencement of the policy cannot be altered during the tenure of the policy.
What are the eligibility conditions to avail the single premium investment plan?
The eligibility conditions for availing the single premium investment plan areas under:
- The sum assured opted under the single premium plan must be at least 1.25 times of the single premium of the policy.
- The cover opted under the single premium plan cannot be reduced, except in the last 2 years of the policy tenure.
- The tax benefits under Section 80C of the single premium plans can be claimed only in the first policy year and only if the amount is 20% of the opted sum assured or 5X of the cover amount.
What are the factors to be considered while selecting single premium plans?
There are numerous single premium investment plans offered by various companies that are available in the market. If you wish to make a conscious decision regarding the selection of best single premium plan, then following are the important factors that you must consider:
- Insurance Goals: The most important factor to be considered while buying a single premium plan is the amount of cover the policyholder wants to avail. The single premium plans have a minimum sum assured 1.25 times the premium amount. So, it is very important to plan a premium amount that is in sync with your insurance goals.
- Tax Saving: As mentioned above, the tax benefit under the single premium plans can be availed only in the first policy year. So, if the investor’s tax bracket changes during the tenure of the policy, then he/she shall have to invest in another tax-saving instrument.
- Premium Amount: Many investors are of the opinion that single premium plans are hassle-free as there is no need to keep a track of the premium due date. However, the payment of premium is one-time and in lump sum, so it is of utmost importance that the investor is sure about investing in a particular life insurance plan before making the big-ticket investment.
How to choose the best single premium plans?
The best way to choose the best single premium plan is by doing thorough research about the various features and benefits of various single premium plans available in the market. Many insurance providers for the convenience of their customers have designed single premium investment plans that cater to their future financial requirement and aid savings. Kindly note that the choice of selecting the best single premium plan must be based on the personal financial requirement of the policyholder.
For making a wise and informed decision, it is important that you compare all the popular policies offered by leading insurance providers like LIC, ICICI Prudential, Reliance, Bharti AXA, etc. and the benefits of their single premium plans. The prospective investor can anytime contact the respective insurance companies in order to know and understand the insurance product in depth, and also clarify their doubts if any related to the single premium investment plan. Thus in this manner, a prospective investor can purchase the best single premium plan.
Recommended Read: Low Risk Investment Options Right now which will Make you Rich!