There are many types of life insurance plans. We charge it according to the convenience and amount of premium. According to the convenience, let us also see for how many years the premium of Rs. Some people also want to get rid of recurring premiums and end the stress of life by paying money in one go. Pay the premium once and avail life cover. Such life plans are called single premium insurance plans. Under this, the lumpsum amount is paid only once. This eliminates the hassle of making regular payments. By paying the money, it becomes free till maturity.
The most important thing about this policy is that there is no risk of lapse in it. Since the money is to be paid in one go, there is no question of policy lapse. In a regular plan, you always have to keep an eye on your premium and its due date. If the last date is passed, then some fine has to be paid. If the policy lapses, then there is a rush to get it started again. Once the money is paid in a single premium policy, it remains valid till the end of the policy. In a regular plan, you have to pay on a monthly, quarterly, half yearly or yearly basis.
Tax exemption is available on a single premium policy as is available on a regular policy. There is no difference in this. You can claim tax deduction on premium under section 80C of Income Tax. Along with this, the sum assured is exempted from tax under section 10D.
Who should take Single Premium Insurance plan?
People who suddenly get a large amount, get a large amount from the family or have a big profit in any business, investment etc., then they can take a single premium policy. Businessmen who earn a lot in a year, earn a lot of profit, they can take this plan. In life insurance premiums have to be paid for several years. Therefore, those who do not have a fixed income source, who do not always have a regular income, can go for a single premium policy. Such people will have to add money once, but if they take the policy, then there will be no tension in the future. They will get freedom from the headache of paying premiums again and again.
This type of policy is suitable for those working on freelance or consultant basis as they get a good lump sum amount. This policy is considered better for people working on short term or contract basis.
Tax Benefits under Single Premium Insurance Plan
Tax exemption is available on single premium policies under section 80C and 10D. However, the premium of this policy can be availed of tax only once a year is paid. If you buy more than one single premium plan in a year, then all will not get the benefit of tax exemption. This means that one can take only one such policy in a year to save tax.
If the policyholder dies before the end of the plan, the death benefit is not satisfactory. Suppose a person bought a policy of 20 lakh sum assured with a single premium of ₹ 50,000. This policy was taken for 10 years. If he died after 7 years, he would have to pay only ₹ 35,000 in the regular policy while 50,000 in the single premium. Death benefit, while both are almost equal.
Once the money is paid in a single premium policy, it remains valid till the end of the policy.
In a regular plan, you have to pay on a monthly, quarterly, half yearly or yearly basis.