Beginners Guide to Single-Premium Endowment Plan

A single premium policy is a policy paid through a single premium payment at the beginning of the term, rather than paying insurance premiums at periodic intervals like that in a traditional premium policy.

If making regular payments is inconvenient for you, or you do not have a steady cash flow, then a single premium policy is just the right option for you. If you are in your most productive years and can afford a one-time payment, it is advisable to invest in SPLs.

• Protection Against Taxes: SPLs protect your wealth against taxation. An amount up to Rs 1.5 lakhs is deductible from the taxable income under section 80C . However, being a one-time payment, this benefit is only for the year in which you make the payment and it may be adjusted against other 80C investments as well.
• No Issue of Lapses: You do not have to keep track of premium due dates as the policy is fully funded beforehand. Hence, you won't have to worry about the policy lapse due to non-payment of instalments.

• Starting Early Gets Better Benefits: The sooner you purchase a single premium life insurance policy, the better will be the death benefit returns. The following example will make this clear. 30-year-old Mr Chirag and 60-year-old Mr Bhola, both in good health, invest Rs. 10,000 in SPLs. But Chirag will receive a death benefit of Rs. 50,000, whereas Bhola will receive a benefit of Rs. 25,000.
• It is One-time: One of the major drawbacks of SPLs is its cost limitation. This policy requires a large sum of money to be paid at a time. Therefore, unless you have a considerable amount of funds that you intend to invest in long-term goals, purchasing SPLs would be worthless unless needed for emergencies.

If you have enough cash to invest right now and want guaranteed life insurance for yourself and your loved ones while also planning for your future, a single premium endowment plan might be your best shot.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.