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Insurance Basics

All you need to know about single premium life insurance

28 December 2016
Want to get over with buying an insurance policy at one go because you have some money lying idle? A single premium insurance policy is just the thing for you then.
 

By Gargi Banerjee

Want to get over with buying an insurance policy at one go because you have some money lying idle? A single premium insurance policy is just the thing for you then. As compared to a traditional or a regular premium insurance policy where you pay insurance premiums at periodic intervals, this is a onetime payment solution for those who do not want to get into the hassle of periodic payments.

Once the premium payment has been made, you become the owner of a policy with a specific death benefit. It is literally a “fill it, shut it and forget it” kind of a policy, as you do not have to worry about paying any further payments or the lapse of your policy in case in forget to make any payments. All major insurers provide single premium life insurance policies for the benefit of their customers and you can use the help of a policy aggregator website to find out which one works best for you.

When should you buy a single premium policy?

Most people prefer to buy a single premium life insurance policy when they have a lump sum available with themselves. It may be a hefty tax fund, a cash gift from a relative an inheritance or some windfall gains in case of business owners. If you do not wish to spend this money right away and are wary of investing it in the markets, or you think there is some more insurance cover you could do with, you can certainly opt for a single premium life insurance policy.

Protect your wealth against taxation

A single premium life insurance policy provides you protection against the axe of taxes. You are given exemption of upto R 1.5 lakhs when you invest in a single premium life insurance policy. Further the sum assured is also tax free in the hands of the receiver. God forbid if something were to happen to you, your beneficiary would receive the money completely tax free. However do bear in mind, that on a single premium life insurance policy you will get the benefit of tax exemption only once, as you are investing in it for a single time only.

Forget about lapses 

Since the policy is paid up in full upfront you never have to worry again about the policy getting lapsed in case you forget to pay the premium. It is valid till the entire term of the policy and renders the sum assured after the policy term comes to an end. Creates cash value.

When you make the payment of single premium on a policy you are creating an asset for yourself. In case you need to avail of a loan facility, this can come in handy and can be used as a collateral against your loan. Besides, the cash value of the investment you have made accumulates every year, without you having to invest year after year.

Thus as you can see, single premium life insurance policies, though usually not the preferred vehicle for securing one’s life, can certainly offer some benefits. But the largest factor you should keep in mind is the affordability part of it. So if you can think of sparing the lump sum and locking it away to take care of your insurance needs, go ahead and get yourself that single premium insurance policy.

Source: Economic Times

 
 
 

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