When Should One Opt For Single Premium Plan?

Endowment plans and ULIPs cater to both insurance and investment needs. There is also a benefit of tax rebate-These two products, promoted in this way. But, what if for some reason they are not able to pay the premium on regular period? Do you think single premium policy the right decision?

Rising interest rates have played an essential role in this trend. Kailash Mittal, SVP-actuarial at HDFC Life, says that insurance companies can keep very competitive prices for single premium products in terms of risk management. This thing will attract customers to invest in them. Due to this, the sale of an individual premium plan has increased. The causes may be many, but some financial specialists consider that the insurance will repay more regard to annual premium outputs. Does the question arise that how should customers compare regular and single premium products? 

When should a single premium life insurance policy be purchased?

Single premium life insurance plans are suitable for people searching for a fixed sum in a strategic path to save. A standard rate life insurance package can help you keep your assets, provide you with a robust life insurance plan and, in exchange, insure that needless costs don’t drain your money.

Individuals with volatile and unpredictable earnings can often participate in single premium life insurance plans because they have the funds available to afford the policy. It will ensure that individuals concerned, consistently provided with life cover, irrespective of onces financial position during the policy tenure. Follow the following points before purchasing the single premium life insurance plan.

Know your financial situation

It is difficult for any working person to pay in one lump sum. The option of the regular premium is more convenient for them. Non-payment of monthly premium causes the policy to lapse. For those who are afraid that they will not be able to pay a regular premium, another option is right. Suresh Sadagopan, the founder of Ladder 7 Financial Advisories, says single premium plans are suitable only for those people who don’t have a regular cashflow.

Single premium plans are also suitable for those who are unable to remain in financial discipline. However, they do not want to harm the family due to their weakness. Somewhere, even if you get a lump sum, this option can be considered. 

Avoid being misled

Agents selling life insurance often lure in tax benefits. Many people have accepted life insurance as synonymous with tax savings. It is true that under Section 10D, the amount received on maturity of the policy is tax-free. 

However, it should be well-know that not all single premium policies are eligible for tax benefit. The rules say that the premium should not exceed 10 percent of the sum assured in any given year. If this limit surpassed, then the price obtained at maturity will be added to the taxable earnings at the time of maturity. The tax shall levy according to the tax slab applicable. This practice is essential to the policy sold after April 1, 2012. The limit for the policy sold earlier is 20 per cent of the sum insured.

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