Know More about Single Premium Term Insurance

Generally, when you buy a term insurance policy, you must pay the premium periodically as per the agreed terms and conditions to keep the policy active. If you opt for a single premium term insurance, you can pay the premium in a single payment and enjoy its benefits till the end of the policy term.A single premium term insurance is a one-time payment solution; you need not renew the policy periodically; it remains active till the end of the policy term.

One of the most significant benefits of buying a single premium term insurance policy is that you need not worry about monitoring the policy and pay regular premiums. You pay the premium once, and it will remain active for the full policy duration.In the case of the regular premium term insurance plans, if you miss the premium payment, the insurers generally give a grace period for payment. However, if you miss paying the premium even in the grace period, the policy will be terminated.A term life insurance policy ensures financial protection for your family, even in your absence. With the premium paid upfront as a lump sum amount, your family need not worry about future premium payments. Also, they need not deal with complex renewal procedures. They have to file a claim in the event of an unexpected event, and the insurer will pay the death benefit.Another significant feature why many people prefer buying a single premium term insurance plan is that it can be used as collateral to avail of a loan against the policy.Tax benefit is an important aspect of a term insurance investment. Many people buy a term policy mainly to reduce their annual tax liability. The premium you pay for the policy is eligible for deduction up to Rs. 1.5 lakhs under Section 80C of the Indian Income Tax Act.Also, the death benefit paid by the insurance company is exempted under section 10(10D) of the IT Act in the hands of the beneficiary.However, to claim the tax benefit, the premium paid must not exceed 10% of the sum assured. If the premium is more than 10%, only the premium equal to 10% of the sum assured is eligible for tax benefit.

A single premium term insurance policy is a boon for people planning to secure the family’s future but do not want long-term commitments.

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.