Best Single Premium Policies in India

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The conventional mode of paying the premium is making a monthly, quarterly, half-yearly or yearly payment. A Single Premium Policy works in a more evolved way, it needs the insured to pay once and offers a coverage throughout the chosen policy tenure. Apart from the convenience, the reason why single premium policies are preferred over regular policies is that it leads to substantial cost savings. Here's how, suppose Mr. Kansal opts for a 1,00,000 life cover.  As can be seen from the table below, he can save up to 30% when he chooses to buy a Single Premium Plan instead of a regular plan. 

Policy Term

5 yrs

10 yrs

15 yrs

Regular Premium (annual)

1000 x 5 = 5000

1200 x 10 = 12000

1400 x 15 = 21000

Single Premium Policy

4000

9000

15000

Savings

1000

3000

6000 

 

But that's not all, a single premium policy offers even more benefits to the insured such as:

  • No obligation to remember and keep up with the premium due date
  • It is convenient for those who are too lazy to make a regular payment or those who do not have a steady cash flow
  • It is good for those  who are in their most productive years and can afford to make a one time payment
  • It works quite well for frequent travelers

Tax Benefits – The tax benefits are more or less similar in single premium policies as in regular polices. Under section 80C, the premium paid is eligible for tax deduction. Under section 10 (10D), the maturity benefit is tax free. However, IRDA issued new tax rules in the year 2012 for single premium policies according to which, the criteria for eligibility of tax benefit is that the premium should not be more than 20% of the sum assured. So, for a life cover of Rs 1,00,000, the premium should not exceed Rs 20,000. If the premium is more than Rs 20,000, say Rs 30,000, the tax benefit under section 80(C) will be restricted to 20% of the sum assured. So, the tax deductible amount will be Rs 20,000 (and not Rs 30,000).

Also, if the premium exceeds the 20% of the sum assured, the tax benefit under section 10(10D) will not be applicable on the plan anymore.

Coming to the glitches, a single premium policy doesn't seem to work well for salaried individuals due to the affordability factor. Further, when there's a turning point in life like you get married or you get a promotion at your workplace, it offers no flexibility in changing the coverage. So it's more apt to get a single premium plan when you are a married, well settled individual in your mid 30s.

Another not-so-good thing about a single premium policy is the fact that the tax benefit on this type of plan will be applicable just for the year in which you make the one time payment. Thereafter, there will be no more tax benefit as no subsequent contribution is made.

Financial experts have discovered a serious flaw in single premium policy. They reveal that getting a life cover proves to be costlier in single premium plans compared to the regular plans.

Here's an illustration to understand the same. Suppose Mr. Bansal opts for regular payment of premium (Rs 5000 annually) on a 10 year life cover of Rs 5,00,000. He dies in the 3rd year of the policy due to an accident. His beneficiary gets the death benefit. The death benefit costed Mr. Bansal Rs 5000 x 3 = Rs 15000. However, if he had opted to pay a single premium (let's assume Rs 30,000) for the same term and same cover. The death benefit in that case would have costed him Rs 30,000 (almost twofold compared to a regular policy).

But even after these glitches, single premium policies continue to be a favorite among buyers. This is primarily because they are seen as the last resort of saving taxes at the end of the financial year. Well, we agree that it's one of the best financial products with the dual benefit of insurance and investment. Here's our pick of the 7 best single premium plan policies for the year 2013.

Insurance Company

LIC

Aviva

IndiaFirst

HDFC Life

Bajaj Allianz

Max New York Life

ICICI Pru

Name of the Plan

Jeevan Vriddhi

Life Bond

Smart Save Plan

Single Premium Pension Super

New Risk Car II

SMART Steps Single Premium

iAssure Single Premium

Type

Endowment Plan

ULIP

ULIP

Pension ULIP

Term Plan

Child ULIP

Endowment

Entry-Exit Age

8 - 50yrs

2 - 65yrs

5 - 60yrs

40 - 75yrs

18 - 60yrs

21 – 50yrs

 

3 months – 15 yrs

8 – 75yrs (for a 5 yr policy term)

 

13 – 75yrs (for a 10 yr policy term)

 

Policy Term

10

10 – 73

15

10

5 – 40

10 – 25

 

5

or 10

 

Premium

30000

50,000 – No limit

45,000 – No limit

25000

5,000 – No limit

50,000 – 3,00,000 

3,00,000 and above

 

20,000 – No limit

Sum Assured

1,50,000

Single premium x 5 (option A)

Single premium x 1.2 (option B)

Single premium x 1.25

(up to 45 yrs) 

Single premium x 1.1(above 45 yrs)

Higher of the two - 

Fund Value/ Single premium x 1.1

2,00,000 – No limit

Single Premium x 5

Single premium x 1.25

 

1. LIC Jeevan Vriddhi

LIC rules the rooster when it comes to single premium policies. LIC has launched many successful single premium policies in the market out of which we picked out Jeevan Vriddhi. The guaranteed maturity sum assured on this plan depends on the single premium amount and the entry age of the insured. The policy can be surrendered just after an year with 90% of the single premium paid back.

Other benefits include loyalty additions to the maturity benefit if the insured stays invested for a term as specified in the plan. The insured also gets to enjoy incentives for higher single premium (up to 3%, when premium > Rs 1,00,000). Moreover, a loan can be applied against this plan at an optimal interest rate.

2. Aviva Life Bond Advantage

LifeBond is a very flexible single premium ULIP with one of the widest bracket for the policy term. The premium starts with Rs 50,000 with no maximum limits. The sum assured is 5 times the premium, hence the insured becomes eligible for the tax benefits under the new IRDA guidelines.

Owing to its beneficial features, LifeBond Advantage is a great value for money. The plan comes with an inbuilt Accidental Death Benefit. The insured can opt for systematic partial withdrawals after a lock in period of 5 years. It also offers top-ups to earn additional life cover. The top-ups start with a minimum of Rs 5,000. But the string of benefits doesn't end here, the insured also gets to earn loyalty additions (4% of fund value) for staying invested for 10 years.

3. IndiaFirst Smart Save Plan

IndiaFirst is fast emerging as one of the leading life insurers in India. The brand is renowned for designing new innovative insurance products. Smart Save is one such plan boasting of a gamut of features. It is an ULIP with a fixed policy term of 15 years. However, the insured can make partial withdrawals as and when need arises.

The investment can be made in a choice of five funds with different growth potentials. The insured can allocate the premium proportionately among these five funds and enjoys the freedom of switching from one fund to another.  The minimum sum assured is 125% of the single premium in case the entry age is 45 years or below and 110% of the single premium in case the entry age is above 45 years. The maximum sum assured is 500% of the single premium in case the entry age is 50 years or below and 110% of the single premium in case the entry age is above 50 years.

4. HDFC Life Single Premium Pension Super

Single Premium Pension Super is a Pension ULIP. The USP of this plan is that the minimum sum assured is figured out as the higher of either  two – fund value or at least 101% of the sum of all the premiums. So it's a win-win proposition for the buyer. It's like getting the ULIP advantage minus ULIP uncertainty.

The policy can be surrendered after a lock in period of 5 years. The insured can also buy top-ups starting with a minimum of Rs 10,000  to enhance the existing coverage. The investment is made in equity and debt instruments in a way so as to maximize potential of returns without exposing the funds to risk.

The maturity benefit can be availed in either of the following modes -

  • 1/3rd amount will be paid as a lump sum and will not be taxable, the rest 2/3rd will be paid as a regular annuity and will be taxable
  • The entire proceeds is converted to annuity
  • The entire proceeds is used to purchase another single premium health plan
  • The policy term is extended if you haven't reached the age of 55 yet

5. Bajaj Allianz New Risk Care II

New Risk Care II is a pure term plan where you get a cover for a specific term by paying a single premium. The reason why it made it to our list is that it offers a high insurance cover at a very low premium.

Since it's a pure term plan, there are no maturity benefits (that's why the premium is so low). The cover can be enhanced by opting for additional riders and benefits. If the insured opts for a high sum assured,  he gets to enjoy discount in premium.  The plan offers insured the flexibility in choosing the sum assured and policy term.

6. Max New York SMART Steps Single Premium

What can be better to invest a surplus amount than to secure a brighter future for your child. SMART Steps from Max New York is a Child ULIP offering the insured, liquidity and flexibility. The investment is made in a wide choice of funds such as frontline equity fund, dynamic floor fund, dynamic bond fund and so forth. Apart from the regular maturity benefits and death benefits, the insured gets to enjoy tax benefits under section 80C and section 10 (10D).

The policy offers the insured top-ups starting with a minimum of Rs 5,000. The buyer can also avail partial withdrawals benefit for meeting unplanned expenses. 

7. ICICI Pru iAssure Single Premium

iAssure Single Premium is an endowment plan offering a substantial risk free return along with a life cover. In case the insured dies, during the policy term, the beneficiary gets either sum assured or guaranteed maturity benefit, whichever is higher. Guaranteed maturity benefit is calculated taking into account factors such as premium amount, age, gender, policy term, sum assured multiple and the applicable reference rates.

The minimum sum assured is 125% of the single premium. The maximum sum assured is 500% of the single premium in case the entry age is 55 years or below and 125% of the single premium in case the entry age is above 55 years.

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