Life insurance is a financial planning tool that protects your loved ones. It ensures that the beneficiaries mentioned in the policy receive a death benefit, which provides financial security to their loved ones even if they pass away. The importance of life insurance cannot be stressed enough but with time, it has been seen how having life insurance coverage can help people.
A life insurance plan comes with different life insurance premium payment modes, such as Regular Pay, Limited Pay, Single Pay and premium payment frequencies such as annual, semi-annual, quarterly, or monthly.
We will specifically discuss what a single premium plan is, how it works, when you should buy one, and what benefits you will get.
What is a Single Premium Plan and How does it work?
A single premium plan is a type of life insurance premium plan in which the policyholder pays a lump sum of money as a one-time premium payment rather than paying premiums regularly. In the event of your death, the policy death benefit will be paid out to your beneficiaries. If you have a savings plan, you can receive a maturity benefits once your policy matures.
When Should You Opt for A Single Premium Policy?
Everyone knows about the need for life insurance when it comes to securing their loved ones. Here are some reasons why you should choose a single premium life insurance plan:
- If you have a large sum of money to invest all at once and need coverage immediately, you should go for the single premium pay.
- If you want to avoid the hassle of regular premium, then a single premium plan is suitable for you.
- If you want to leave a lump sum amount to your beneficiaries behind you, then it is a good premium payment plan to go with.
With a Tata AIA Life Insurance plan, you can opt for the Single Pay premium mode and invest a one-time amount in your life insurance policy for life insurance coverage of your choice.
Advantages of a Single Premium Life Insurance Policy
- Lower Overall Cost: One of the most significant advantages of a single-premium life insurance policy is that it is typically less expensive than a regular premium. Since you are making a lump sum payment upfront, you will likely get a discount on the premium amount. Additionally, you save on the long-term costs associated with regular premium payments.
- Guaranteed Death Benefit: Another advantage of a single premium life insurance policy is that it offers a guaranteed death benefit to your beneficiaries. Regardless of how the markets perform, your beneficiaries will receive the specified amount upon your demise since the amount is not linked to any market instruments. This will, however, depend on whether you opt for a life insurance policy or a Unit-Linked Insurance Plan.
- Tax Benefits: Single premium life insurance policies also offer tax benefits. The premium amount you pay is eligible for tax deductions under Section 80C of the Income Tax Act up to a limit of ₹1.5 lakhs. The death benefit paid to your beneficiaries is also tax-free under Section 10(10D) of the Income Tax Act.
A single premium life insurance policy is a good option when you have a considerable amount of money to invest upfront, so that you need not pay regular premiums. Be it a term insurance policy or any other form of life insurance policy, a single premium policy can help you plan your finances and keep the worries of paying monthly or annual premiums away.