In the post-pandemic world, the primacy of insurance has been driven home in a large segment of the population. And one of the types of policies gradually getting popular is the single premium policies. Experts say that a huge section of the youth who find it difficult to get into the habit of making regular savings, single premium term insurance plans are becoming popular.
A single premium term insurance is a life insurance plan which one can buy with a single premium. That one premium will be sufficient to take it to maturity. Like normal term insurance, it will offer death benefits to the policyholder’s family.
Anyone between 18 and 65 years can buy these policies.
Types of death covered
Natural deaths and those caused by accidents and illness are covered by these plans.
Single premium term insurance policies are generally for short terms such as 5 or 10 years.
Pay once and forget
The most prominent USP of these policies is that they offer a completely hassle-free payment mode. One does not have to keep track of the payment schedule. Consequently, there is no problem with missing premium payment dates and the policy lapsing for non-payment beyond a certain time limit.
Affordability factor
Since one does not have to pay premiums regularly, the premium paid once at the time of buying the policy is less than that required by normal term insurance policies of the same period and coverage. Therefore, in a sense, single-term policies are more affordable.
More tailormade
The policy buyer has a higher flexibility to select many variables according to his/her choice. These are the tenure of coverage and other features to design a policy tailormade to suit the buyer’s needs.
Income tax benefit
The premium paid is entitled to tax deduction up to Rs 1.5 lakh per annum under section 80C of the Income Tax Act, 1961 while the death benefit is tax-free under section 10 (10D).
The exemption from tax is variable for single premium policies and the buyer cannot claim tax deductions if the premium is higher than 10% of the sum assured.
Howover, one can claim tax benefits only for the year when the premium has been paid.
Companies say that often policy buyers resort to single premium term policies to utilise a lump sum payment that they have made – from a reward or a profit in business.
Insurance policies have traditionally been associated with the regular payment of premia. But single premium insurance policies are getting popular for a few reasons. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
