Last updated on June 12th, 2021 at 07:40 pm
Life insurances are a one-time investment plan which now gives insurance-cum-investment plans. Since the premiums that are paid by the policyholders is an important chunk of their earning, it is, therefore, important to invest and put in money smartly without ripping the financial condition. The major benefit of a life insurance is to be a financial support for the policyholder and create a heritage for him or his family.
Single Premium Policy
Mostly people choose to buy single premium policies; it is a one-time investment which then covers life for a specific term or whole life as per terms of contract with no additional premiums to be paid. A Single Premium policy is the one in which the premium amount is paid in lump sum at the beginning of the policy as a return for the death benefit which is guaranteed to be paid up until the death of the policyholder. Generally, to benefit the customer better all the major insurance companies provide Single Premium Life Insurances, and the get a better idea of these you can take help of the Policy aggregator websites and compare policies better.
A Life Insurance with Single-premium benefits is a type in which the premium is paid in lump sum to the policy to which in return death benefits are promised to be paid until the policyholder die. The year 2016 had a lot of goodies for the insurance companies and the insurance investors. One of it was that the budget has proposed to reduce the rate of the composition of service taxes on Single Premium Annuity plans from 3.5% to 1.4% of the premium i.e. charged. But, this is applicable only in a case where the allocated amount for investment or the savings on policyholder’s behalf has not been informed to him at the time of service.
Why Single Premium Life Insurance?
The Life insurance plans provides Single Premium benefits builds up the cash invested really fast as the policy gets funded completely. Hence, the death benefit’s size depends on the age, the health of the insurer and the amount invested. If you invest early, then your funds get more time to grow before the expected death and payout by the insurance company and the life expectancy that is calculated is longer. Therefore, the larger amount of contribution you make to your premiums initially the better payout benefits you get.
How a Single Premium Life Insurance Benefits?
Though the life insurance policies provide you with death benefits for your beneficiaries, you still need to reconsider on the uncertain expenses that crop with age. The importance of long-term care insurance is well understood as it an expensive investment plans for once.
A Single Premium insurance gives you tax-free death benefits having a long term consideration over the living expenses. This feature of it safeguards your other assets as well from their long-term potential maintenance costs. Your beneficiaries get the death benefits from your policy as a tax-free income.
If you do not use any of the money out of the policy, then it goes to your beneficiaries as per contract. The remaining death benefit in the policy after you die shall pass as income-tax free to your beneficiaries. Hence, it allows you to leave the maximum amount of your death benefit in place for your family along with covering your long- term care needs.
No More Lapses
As the policy premium is single and is paid up in a lump sum, therefore, you do not have to stress over policy getting lapsed in a case of premium non-payment hence, making the policy valid for the entire policy term, which creates a good cash value while you render policy benefits in the end.
Also, while paying the single premium for the policy you create an asset of it for yourself which can be to avail the loan in case needed. Few SPI plans also have a special feature that allows you to withdraw part of your death benefit given your life expectancy is now of 12 months or less or you are being diagnosed with any terminal illness. This benefit gives you’re the liberty to use your premium paid and rely on it as you can consider this as an asset if your capital is limited outside of your Single-Premium policy.
How about Tax Deductions?
It has a tax deduction benefit under section 80C up to Rs. 1lakh p.a, however, the this has a tax reduction only once wherein a regular premium policy will have deductions continuously.
Therefore, single premium life policies which are a preferred measure to secure life for a long term along with some other special benefits. Also, the major reason to opt this would also be its affordability part. Hence, you can consider locking your funds into this to take care of your long-term needs. Think of it… Kick in with Single Premium Plans.