Everyone wants to save as much as possible while paying the premium for his/her insurance plan. in this respect, the single premium insurance plans are the most cost-effective ones. The traditional insurance policies require the insured person to pay the premium amount in periodic intervals, like monthly, quarterly, half-yearly, or yearly. But in the case of single premium plans, you need to pay the premium just for one time while buying the policy, and you can avail yourself of the benefits and the coverage of the policy throughout the policy tenure without having the tension to pay the premium in periodic intervals. This type of plan makes up for a great investment coupe and is popular for great tax savings.
Benefits of Single Premium Insurance Policies
Once you get to know the advantages of single premium policies, you would perhaps never opt for the plans which require paying the premiums at period intervals. Have a look at the following mentions for more details.
- You do not have to remember the premium due date of your policy.
- If you do not have a steady cash flow, or if you want to make a one-time investment, this type of policy is the most suitable one for you.
- Single premium plans are good support for frequent travelers.
- Under Section 80C of the Income Tax Act of India, the single premium policies are eligible for the tax exemption benefit. Under section 10 (10D), the maturity benefit is tax-free. However, IRDA issued new tax rules in the year 2012 for single premium policies. According to that, the premium amount should not exceed 20% of the sum assured, only then the insured person would be eligible for the tax exemption benefit.
For example, suppose the life cover of a policyholder is Rs 1,00,000. In that case, the premium should not be more than Rs 20,000. If the premium exceeds Rs 20,000, suppose it is Rs 30,000, the tax benefit under section 80(C) will be restricted to 20% of the sum assured. So, the tax-deductible amount will be Rs 20,000 (and not Rs 30,000). The tax benefit will be applicable only for that year in which the one-time payment has been made. Afterward, the policyholder cannot avail of any tax benefit as no premium is paid thereafter.
Best Single Premium Policies available in India
The following table gives you a brief sketch of the best single premium plans available in India and their eligibility criteria.
| Plan name | Entry age | Maturity age | Policy term | Sum assured |
| LIC’s Single Premium Endowment Plan | Minimum – 90 days Maximum – 65 years | Minimum – 18 years Maximum – 75 years | Minimum – 10 years Maximum – 25 years | Minimum – Rs. 50,000 Maximum – No upper limit |
| ICICI Pru iProtect Smart Term Plan | Minimum – 18 years Maximum – 65 years | Maximum – 75 years | Minimum – 5 years Maximum – 20 years | Minimum – Subject to minimum premium Maximum – Unlimited |
| HDFC Life New Immediate Annuity Plan | Minimum: POSP Channel: 40 years Other Channels: 20 years Maximum: POSP Channel: 70 years Other Channels: 85, and 99 years | NA | NA | Annuity pay-out per frequency |
Minimum: Yearly – Rs. 10,000 Half-yearly – Rs. 5,000 Quarterly – Rs. 3,000 Monthly – Rs. 1000 Maximum – No upper limit | ||||
| Kotak Single Invest Plus | Primary life: Minimum: 18 years Maximum: 55 years for 10 years term 52 years for 15 years term Secondary life: Minimum: 3 years Maximum: 55 years for 10 years term 52 years for 15 years term | Primary life: Minimum – 28 years Maximum – 65 years for 10 years Term 67 years for 15 years Term Secondary life: Minimum – 18 years Maximum – 65 years for 10 years Term 67 years for 15 years Term | 10 years and 15 years | Premium level |
Minimum – Rs. 3 lakhs Maximum – No upper limit | ||||
| Aegon Religare iMaximize Insurance Plan | Minimum – 7 years Maximum – 55 years | Maximum – 70 years | 15, 20, and 25 years | Minimum premium |
Rs. 24,000 for PPT 10 / 15 years / Equal to policy term Rs. 36,000 p.a. for PPT 5 and 7 years | ||||
| IndiaFirst Smart Save Plan | Minimum – 5 years Maximum – 65 years | Maximum – 75 years | 5 years to 20 years | NA |
It is a with-profit Non linked, Participating, Individual, Life Assurance, a savings plan that has come up with an attractive combination of savings and protection features. The premium is paid in a lump sum at the outset of the policy. It not only offers you financial protection against death during the policy term but also provides you with the provision of payment of lumpsum at the end of the selected policy term as the survival benefit.
Key highlights of the plan:
- This plan takes care of liquidity needs through its loan facility.
- If the life assured survives the policy term, he/she is entitled to receive the sum assured as the maturity benefit along with the vested Simple Reversionary Bonuses and Final Additional Bonus, if any.
- The insured person can opt for the additional benefit available with this policy, and they are LIC’s Accidental Death and Disability Benefit Rider and LIC’s New Term Assurance Rider.
- The maturity benefit and the death benefit can be received in instalments, monthly, quarterly, half-yearly, or yearly.
2. ICICI Pru iProtect Smart Term Plan
This plan is specially designed for those who want to have a customized flexible insurance plan to protect their families from different types of risks. This plan offers you the option to strengthen your policy against accidental death, accelerated critical illnesses, and disability. Therefore, this plan offers you a comprehensive, 360-degree cover to safeguard your life. This plan is also available online.
Key highlights of the policy:
- The non-tobacco users and women will get premium rates if they opt for this plan.
- With this plan, the insured person has the flexibility of choosing to receive the benefit amount as a lump sum or as monthly income for 10 years or a combination of both.
- This plan has come up with four variants to choose from, namely, Life, Life Plus, Life & Health, and All in One.
- There is no maturity, paid-up value, or survival benefit available under this product.
3. HDFC Life New Immediate Annuity Plan
This is a retirement plan that promises you to make the golden days of your life, post-retirement protected and enjoyable as it offers guaranteed income for a lifetime. It is a single premium, non-participating, non-linked annuity plan that has come up with various annuity options.
Key features of the policy:
- This plan guarantees that you will receive the annuity as long as your partner is alive. And you can receive the annuity amount either monthly, quarterly, half-yearly, or yearly, as per your convenience.
- The company offers you the benefit of higher annuity rates for a large purchase price.
- This plan gives you the facility the return of the purchase price in the event of death or detection of critical illness.
- There is a special provision for banks or financial institutions to purchase immediate annuities in respect of annuity payments for their commitments to the homeowners under the reserve mortgage schemes.
4. Kotak Single Invest Plus
It is a Single Premium Unit-linked Joint Life Insurance Plan under which you can reap the maximum benefits and stay protected at the same time by paying for only one time. This plan has come up with double benefits, joint life protection cover, and loyalty additions.
Key highlights of the plan:
- This plan offers you a wide array of fund options (5 fund options) to invest your money. You have the flexibility to select the fund option as per your requirements.
- This plan has two sum assured levels. Sum assured on the first death is 1.25 times the single premium, and the sum assured on the second death is 10 times the single premium.
- Under this policy, the investment risk under the investment portfolio has to be borne by the insured person only.
- The plan offers loyalty additions at the end of the 10th year for a policy of 10-year term, and at the end of the 10th and 15th year for a policy of 15-year term.
5. Aegon Religare iMaximize Insurance Plan
This is a ULIP plan that promises to offer guaranteed protection and maximum returns as this plan is a combination of insurance and investment plan. It has zero allocation premium charges. The insured person has the flexibility to choose between the two death benefit options.
Key highlights of the plan:
- The payout for this plan will be policy sum assured, or fund value or 105% of all base premiums paid.
- The policyholder under this plan has the freedom to choose from 6 fund options to invest their money.
- One can also enjoy the freedom to switch his/her invested premiums from one fund to another. Up to 4 switches are allowed free of charge in each policy year.
- In case of a financial emergency, this plan allows you to do partial withdrawals. After the first 5 policy years, you can withdraw up to 20% of Fund Value at the beginning of that policy year. Up to 4 partial withdrawals in each policy year can be made free of charge.
6. IndiaFirst Smart Save Plan
This plan is a combination of the benefits of both an insurance cover as well as a wealth builder as it uses market-linked investments to help you save systematically and build your wealth portfolio, depending on your risk appetite. It is a ULIP and money-saving plan that helps you to grow your economic corpus to protect yourself and your family.
Key highlights of the policy:
- If the life assured suffers an untimely and unfortunate demise during the policy term of an active policy, then the life cover is provided by this policy.
- This plan gives you the freedom to optimize your investments by switching and redirecting your premiums from one fund to another.
- There are four fund options available under this plan, and they are the Equity1 Fund, the Debt1 Fund, the Value Fund, and the Balanced1 Fund.
- Keeping in mind your financial emergencies, this plan offers you the facility of partial withdrawal after the completion of the lock-in period. There are no partial withdrawal charges applicable.
Conclusion
While you have read about the benefits of having a single premium insurance policy, there are a few cons as well. This type of policy does not ideally work well for the people who draw salary regularly because of the affordability factor. One more point is that if you are planning to get married or you get a promotion at your workplace, you cannot change the coverage. So, usually, you can go for this single premium policy when you are well settled. Again, the financial experts say that a single premium plan can be costlier than a regular plan when it comes to getting the life cover.
Even after these cons, the single premium policies are proved to be popular among the insurance buyer because of their other advantages that can overshadow the glitches. However, when you are opting for it, think twice and evaluate the potential factors like your financial condition, future inflation, your financial emergencies, your requirements, etc., as a different individual has different backgrounds. If this plan is suitable for one, it may not be ideal for the other. So, be wise while investing.
