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When Should You Buy A Single Premium Insurance Plan?

To avail of the benefits of insurance like term plans or life plans, an investor has to pay a sum of money called premiums. The investor can pay these premiums in periodic or regular instalments every month or in a single go at one time. This one-time payment of premium is known as single premium life insurance.

In a single premium insurance policy, the buyer/ policyholder has to pay the entire cost of the insurance policy in one go in a lump sum. While a single premium life insurance policy is convenient for many, it is not for several others – the decision is subjective.

But is a single premium policy ideal for everyone? And in what scenarios does buying a single premium insurance plan benefit an investor? Let’s find out.

 

 

What are the Benefits of a Single Premium Policy?

 

Here are the top benefits of single premium policies:

 

  • Discounted premiums

     

    One of the foremost benefits of getting a single premium insurance plan is the discounted premiums. Insurers often reward investors for paying the entire premium cost upfront in the form of discounts on the total premium payable.

     

    A single premium policy reduces your total premium outgo compared to regular premium payments. Even though the regular premium instalment might be lesser in the short run, it amounts to more over the tenure instead of a single premium insurance policy.

     

  • Not having to remember timely payments

     

    If you have a tough time remembering to make payments on time and want to avoid the hassle of any late or missed premium payments, single premium life plans will work wonders for you.

     

    Even though it is very convenient to make payments nowadays and you can complete transactions at the click of a button, you can always choose to avoid any risk of non-payment by paying the entire premium price of the insurance plan in one go. That way, you don’t have to worry about paying penalties or setting reminders for insurance.

     

  • Tax* benefits on maturity

     

    In single premium insurance, you get 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.

     

    However, you can only claim up to ₹1,50,000 per annum and only the one time – the year during which you purchase the single premium life insurance plan. 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.


Things to Consider Before Buying a Single Premium Investment Plan

 

 

Buying a single premium plan has an equal set of cons as it has pros. Here are some risk factors you should consider before buying a single premium plan:

 

  • Impact of market risks

    If your single premium policy is not linked to the capital market and is a pure savings-oriented or term insurance plan, then you don’t have to worry about market-related risks. But if your single premium policy is market-linked, you will be exposed to market volatility.

     

    In regular premium payment plans, the rupee cost averaging shares can even out the risk of holding. So, you can benefit from slow markets and the purchase of shares when their prices are fallen. But in single premium policies, you don’t have this benefit or cushion that protects you against market risks. Ultimately, a single premium policy does not shield you from the ups and downs in the capital market.

     

  • Lesser tax* exemptions on yearly premiums

    When you pay premiums towards any life insurance plan, you become eligible to claim them back under section 80C of the Act. With regular premium payments, you can claim tax* rebates up to ₹1,50,000 under Section 80C every financial year. So, if your insurance plan tenure lasts ten years, you can claim this amount every year.

     

    However, with a single premium policy, you can claim deductions only once – that is, during the year you buy the single premium policy. This means you get lesser tax* benefits in contrast to a regular premium policy. However, the benefits under section 10(10D) remain the same for regular and single premium life plans.

     

  • No additional rider# benefits

    With a single premium insurance policy, you can add rider# benefits but only once at the time of buying the insurance policy. Riders# are extra covers that provide an additional level of financial protection in eventualities besides unforeseen death.

     

    The loss is the waiver of the premium rider. Insurers often waive the payment of premium in instances of permanent physical disabilities with the necessary rider#. But as the payment is upfront in a single premium policy, you cannot claim these reliefs if the need arises.

     

    In a regular premium policy, you can choose to add these riders# later on or even top up your insurance plan. But with a single premium insurance policy, if you don’t add these riders# and change your mind after, you cannot add them to your insurance policy.

     

Who Should Buy Single Premium Life Insurance?

 

Single premium life plans are ideal for those with an unsteady or irregular income. Self-employed individuals and freelancers come into this category of persons. Those who are unsure about when their next paycheck or profit will come and have a large amount of money to spare can opt for a single premium insurance policy. Those who also make a sudden profit from a pre-existing investment can also buy a single premium policy.

 

Conclusion

Now that you know the pros and cons of a single premium life insurance plan, you can choose the one that aligns with your needs. There is no one-size-fits-all rule for everyone, and ultimately the choice is subjective. Check out the Tata AIA life insurance company for more information on single premium life insurance.

L&C/Advt/2022/Jul/1691

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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA), Tata AIA Life Insurance is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

Do the tax* benefits remain the same in a single premium and a regular premium insurance plan?

Yes, the tax* benefits remain the same in a single and regular premium plan. However, you can claim the tax* rebate under section 80C only once with a single premium insurance plan.

Which insurance plan is more economical in the long run – single premium or regular premium?

Single premium plans are more economical in the long run because the premium amount gets paid in one go.

Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch

Need more information?

Let us help you

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.

Looking to get a new plan? 

Connect with us now

+91

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.