All You Need to Know about Single Premium Life Insurance
Do you have idle funds to invest? Have you considered a single premium insurance policy? Unlike a regular insurance policy, a single premium plan does not require periodic payments.
This means once you pay the premium, you do not have to worry about losing the coverage in case you forget to pay the renewal premium within the due date. Almost all insurance companies provide single premium plans and doing your research to find the best policy is recommended.
Why should you buy a single premium plan?
You may receive an unexpected gift, or a large refund from the tax authorities, or some windfall gains from your business. If you have a certain amount of idle funds, it is advisable to invest them in a single premium life insurance plan. This ensures you do not spend the money immediately. Moreover, if you are unwilling to assume the higher risks of investing in equity markets, a single premium insurance plan is an excellent option. This will also enhance your life cover providing additional security to your family.
Here are some benefits of a single premium policy:
- Protects your wealth from taxes
An investment of up to INR 1.5 lakh paid as premium towards a single payment insurance policy is tax-deductible. Additionally, the policy benefits that you receive on maturity or the returns that your nominees obtain in case of an unfortunate incident are taxable.This protects your wealth. However, bear in mind that the tax benefits are available only once, as you are investing in this type of life insurance policy on a one-time basis.
- Ensures there are no payment lapses
When you buy a single premium plan, the amount is payable only once. Therefore, you are assured that the insurance coverage is not lost in case you fail to pay the renewal premium on or before its due date. The policy remains in existence until maturity and pays the benefits at that time to create cash value.
- Helps to avail of loans
A single premium insurance plan is an asset that may be monetized in the future in case you require emergency funds. You may use the policy as collateral to avail of a loan to meet any liquidity crisis. Additionally, the cash value of the policy continues to increase every year without having to pay premiums at periodic intervals during its tenure.
One of the most affordable ways to avail of insurance coverage is through a term plan. These policies are available at competitive premiums, thereby enabling you to procure higher coverage at an affordable premium.If you do not have life insurance coverage, buying a term insurance plan is recommended. Insurers also offer single premium term plans that ensure the coverage is available during the entire policy tenure without paying the renewal premium year after year.
Although not a popular way to avail of life cover, single premium insurance plans have certain advantages. However, before investing in one, you need to consider your financial situation. If you have an investible surplus, which you are willing to lock-in for the long-term, a single premium plan is an excellent choice.
