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Here's Your Comparison Guide for Single Premium Vs. Regular Premium Plans

Punjab News Express | February 14, 2019 06:40 PM

When you decide to purchase a life insurance policy, the first thing you need to focus is premiums. It is an amount paid by the buyer to the insurance company which the insurance company pays back to him/her at the end of the policy.Timely payment of premium is essential as it helps in keeping the insurance plan active and avoiding any penalty.

The next important thing to consider is the premium payment frequency. It is nothing but the time interval in which the buyer has to pay his/her premiums to the insurance company. The frequency can be in the form of regular payment or a single payment according to the preference of the buyer. However, majority of the times, buyers get confused on deciding which payment frequency to choose.

In this article, we will provide you acomparison guide for choosing the better premium plan for your life insurance plans.

  1. 1.        The Cost Factor

Cost is the primary and a key factor that you should consider while opting for premium payment options in an insurance product. You might feel that choosing a single premium will be cheaper than going for regular premium payment. However, that is not always the case. For instance, a 30-year-old individual pays Rs. 10,000 as annual premium for 15 years for a sum assured of Rs. 2,00,000. So, effectively he pays 1,50,000.

However, in the single premium option, he only has to pay 1,10,000 for the same sum assured and tenure. This means he can easily save Rs. 40,000,making single premium payment the cheaper option. However, once you consider inflation in this equation, the single premium payment will likely be Rs. 2,63,000 after 15 years at 6 percent rate of inflation. This means a person is paying lot more in term of ‘time value of money’.

  1. 2.      Tax Benefits

Tax benefits are of considerable importance when it comes to choosing an insurance product. In this case, the benefits are available on both of these plans. You can claim a deduction of up to Rs. 1,50,000 under Section 80C. However, the major difference is that in single premium payment term, the tax benefit can only be claimed once. Whereas, in case of regular premium policy, the tax benefit can be claimed throughout the premium payment term in small forms.

  1. 3.      Affordability

It is needless to point out the fact that single premium plans carry a larger bracket when it comes to premium amount. While they may have fewer hassles and seem cheaper upfront, they can put a strain on your account if you are a salaried person or belong to the middle-income group. Thus, single premium plans are perfect for people who have a good sum in hand and wish to invest it somewhere fruitful.

  1. 4.      Returns and Risks

Life insurance plans are generally long-term products. It means that majority of the insurance policies you opt for will have a tenure of at least 10 years or more. You should always go for the premium payment product that protects you from market fluctuations and helps you in benefiting from the exposure to market-linked risks.

  1. 5.      Sum Assured

Sum assured is a crucial feature when it comes to selecting a life insurance policy. You must always go for the premium payment plan that offers higher sum assured. As there is no surety how much money you or your family may require in future, choosing maximum sum assured is the perfect way to attain security from future financial obligations.

  1. 6.      Convenience

Many people find a regular premium payment option a hassle;therefore, choosing a one-time premium option is helpful. It helps in avoiding any chances of policy-lapse and protects the policyholder from losing the benefits of the policy.

Bottom Line

Now that you have gone through the points mentioned above, you must have a clear picture on which option will be better for you. If you are a salaried employee and have small savings, choosing a regular premium payment plan will be better for you. However, if you have a good amount with you, the single premium payment plan will be the right choice for you. Moreover, you can also check other benefits of these plans offered by leading insurers like Future Generali to make the correct choice.

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