Top 5 Single Premium Policy in 2023 – Its Working and Benefits
A single premium policy is a one-time payment insurance policy. It is designed for customers who do not want the hassle of keeping track of the project and making regular periodic payments. This post takes you through the 5 best single premium policies, how they work, benefits, taxability, and why you should invest in a single premium policy.
What is a Single Premium Policy?
In a single premium policy, you make a single payment, become the owner of a single premium policy, and then forget about it until the policy’s term expires. It is also known as a “fill it, shut it, and forget it” policy.
After making the one-time payment, you can expect full coverage for the policy duration. Other advantages of a single insurance plan include:
- Eliminating payment defaults due to the one-time payment premium makes your hectic lifestyle a lot easier.
- People who have to make regular premium payments without a steady cash flow can breathe a sigh of relief.
- Avoid adding unnecessary stress to your life by keeping track of your monthly payments.
5 Best Single Premium Policy in 2023
1. LIC Jeevan Vriddhi
The LIC Jeevan Vriddhi plan is a premium endowment plan that provides risk cover that is a multiple of the premium you choose. The most apparent benefits of this plan are the Loyalty Addition and the Guaranteed Maturity Sum.
2. Aegon Religare Maximize Single-Premium Insurance Plan
You can profit from your investment by making a one-time payment for this plan. The Aegon Religare maximize single insurance plan offers three different investment funds to help you maximize your funds.
3. ICICI Prudential Single Premium Plan
It is an endowment plan with a single premium. This plan is all about tradition and does not include any extra features. This plan is similar to the other ones mentioned here. It would help if you made a one-time lump sum payment to allow the policy to continue for the policy duration.
4. Max New York Single Premium Insurance Plan
It is an endowment plan that aims to improve the lives of children. Its primary goal is to plan for and provide for children’s financial needs.
5. HDFC Single Premium Pension
This ULIP policy generates a corpus over the policy’s term, generating post-retirement income. The period is ten years. Minimum entry age: 40 years. Maximum entry age: 75 years old. Maturity Benefits: 100% of single premiums paid.
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Benefits of Single Premium Policy
- You won’t have to worry about your policy lapse due to the nonpayment of premiums. In contrast, you must keep track of your tips regularly and pay on time.
- Once the premium is paid – the single premium plan is valid until the end of the tenure, instead of a regular schedule, which requires monthly, quarterly, half-year, or annual premium payments.
- The tax advantages are comparable to those of a standard policy. It means that the premium is deductible under Section 80C of the Income Tax Act, whereas the sum assured is exempted under Section 10 D of the same act.
How do Single Premium Policies Work?
Section 10D of the Income Tax Act states that if the premium on the policy exceeds 10% of the sum assured for guidelines issued after April 1, 2012, and 20% of the sum assured for policies given before April 1, 2012, the sum received on maturity is subject to tax. The chances of the premium amount exceeding 10% of the sum assured are significant in the case of a single-premium insurance policy. Because it is a one-time payment, the premium amount may be high, unlike a regular policy, where premiums are spread over several years and thus have lower premium amounts.
One-time plan purchasers can save tax by paying a single premium but only once per fiscal year. If you purchase more than one single-premium plan, you can only claim tax exemption on one policy for that fiscal year. It means that you can buy a new single premium plan each year and receive tax benefits.
However, in case of the death of the policyholder before the term ends, the single premium policy can be more expensive. For example, assume someone paid Rs 50,000 as a one-time payment for a Rs 20 lakh policy for ten years. In the seventh year, the policyholder passes away. If the policyholder chose to pay a regular premium, a total of only Rs 35,000 for 7 years (Rs. 5000 each year) would have been paid.
Why Invest in Single Premium Policy?
Single premium policy sales have recently increased. In April-June 2018, private sector insurers saw a 54.75 percent year-on-year increase in the individual single premium segment, while the regular premium business grew by only 3.84 percent. “In June 2018, LIC remained focused on single premium, accounting for 72 percent of the total premium.” According to a Kotak Institutional Equities report, “the share of single premium for private players increased to 49 percent from 43 percent in May 2018.”
Rising interest rates are a significant driver of this trend. “From a risk management standpoint, insurance companies may be willing to price single premium products aggressively.” This, in turn, creates a compelling proposition for customers who want to lock in these high rates,” says Kailash Mittal, SVP-Actuarial at HDFC Life. As a result, sales of single premium plans have increased. “Customers have taken notice of the LTCG tax issue.” During April-July, our overall sales increased by 20% year on year.
Final Word
Single premium policies are great if you want to pay one time and do not want to pay the premium monthly or yearly. Single premium plans also provide tax benefits but are only available for the first year in addition to financial security. You also ensure that any lump sum of money lying around is put to good use rather than sitting idle in the bank. Choose one of the single premium policies from the list given above and stay insured.
FAQs
Ans: Cash value in single premium life insurance grows tax-deferred at different rates depending on whether you choose whole, variable, or universal life insurance. Because it is fully funded from the start of coverage, an SPL policy will see faster cash value growth than other permanent and term life insurance policies.
Ans: With your insurance policies, you can expect to save money on taxes. Life insurance premiums are always eligible for the maximum tax deduction of Rs. 1.5 lakh under Section 80C. In addition, under Section 10 (D) of the Income Tax Act of 1961, you will be eligible for tax-free proceeds in the event of maturity/death.
Ans: The total amount you pay over time with regular premiums may be greater than the lump-sum single premium. However, each premium installment is less than the total required for a single premium plan. As a result, if you are a salaried employee with a consistent income, a regular payment mode may be more suitable for your financial situation.
Ans: A single premium annuity is an annuity that is paid for with a single payment. The payment may be invested for long periods for growth (single premium deferred annuity) or a short period before payout begins (single premium immediate annuity).
Ans: The proceeds from a single payout life insurance plan are tax-free if the minimum sum assured in the policy is ten times the single premium amount paid. TDS (Tax Deduction at Source) of 1% will also be applicable here. The proceeds from a death claim are tax-free.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
