As consumers seek security in the face of financial uncertainty, sales of single premium plans for life insurance firms have increased. These insurance relieve consumers from having to pay renewal premiums every year and are popular among those who do not have a consistent financial flow. They are also popular among individuals who use them as a last option to avoid taxes at the end of the fiscal year, as well as those who have received a lump amount such as an annual bonus, an investment payment, or a family inheritance.
According to research from Kotak Institutional Equities Research, the percentage of single premium collections to total premium collections was 69 percent in February this year, up from 56 percent in December last year. This suggests that many customers choose bullet payment for life insurance because they are worried about meeting recurrent premium obligations. Private players’ share of single premium grew to 47 percent in February this year, up from 41 percent in January last year.
How Do The Policies Function?
The lowest sum insured in a single premium term insurance policy is 1.25 times the single premium, and the maximum sum covered is 10 times the single premium. These policies are good for the whole policy period and do not expire since there is no renewal. If the policyholder survives the policy’s tenure, the maturity benefit is paid to him or her at the conclusion of the term. If the policyholder dies prematurely, the money will be distributed to the nominee.
Inflexibility Leads To Greater Expenses.
Is it worthwhile to get a single premium policy? According to experts, they are not appropriate for protecting the family’s financial demands. Check the cost structure first, since single premium plans have greater prices. Furthermore, you cannot raise the amount insured with these plans.
Even tax breaks are only valid for one year, and not all insurance include them. Section 10 (10D) allows the proceeds of single premium insurance issued after April 2012 to be tax-free provided the minimum sum insured in the policy is ten times the single premium amount paid. In the event of a death claim, the profits are tax-free.
According to Tushar Chatterjee, a life insurance specialist, consumers should choose a term life policy for their protection requirements and renew the payment. “They are the most cost-effective and take care of the financial demands that arise from life’s unanticipated disasters,” he explains. Furthermore, unlike single premium insurance, a policyholder may tailor the term plan to include critical sickness coverage, a return of premium option, whole life coverage, and coverage for spouse and kid education, among other benefits.