Which is Better: Single or Regular Premium?

Arjun works in a multinational company in Noida. Recently, the 30-year-old made plans to buy a life insurance policy. He expects to receive his yearly bonus from his employer soon, which has put him in a quandary: should he go for a single premium policy or a regular one.

Read more
investent plan
Plans starting from ₹1000/month
hdfc life insurance
loading...
Bajaj Allianz
loading...
Max life insurance
loading...
Best Investment Plans
  • money
    Generate wealth with high returns Earn 1 Cr in maturity with Zero LTCG tax^
  • tax
    Double tax savings^ On premiums (under 80C) and on maturity (under 10(10D))
  • compare
    Compare & choose the best 30+ Plans and 150+ Fund options
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold
In-built life cover

Top performing plans with High Returns*

Invest ₹10K/month & Get ₹1 Crore returns*

+91
Secure
We don’t spam
Please wait. We Are Processing..
Your personal information is secure with us
By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
rating
58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold

Generally, the choice will depend on the income of the policyholders, their commitment levels, and the extra benefits of the policy. The factors that can help Arjun make his choice include:

Affordability: The first question to ask is whether Arjun can afford to pay a large single premium. While his bonus is expected to be sizeable, it won’t be sufficient to cover the entire cost. Salaried people like him may find it hard to pay the large amount up front. They might have to dip into their savings to pay, a scenario that can be avoided if they go for regular policies.

Convenience: Arjun is a forgetful person and fears that he might miss paying his premiums on time. This could lead his policy to lapse. In this case, it may be advisable to go for a single premium policy, that is if he can afford it.

Sum assured and premiums: For regular long-term insurance plans (with terms of 5, 10, or 15 years), the premiums are spread over an extended period. Policyholders are usually given a choice of the number of years they want to pay premiums. The premiums can be spread over for the first few years for a particular amount as sum assured. This way, the premiums will be lower than the onetime premium payment.

Single premium policies are seemingly cheaper than regular ones. Say Arjun has to pay Rs 10,000 as annual premium for 15 years for a sum assured of Rs 200,000. He ends up paying Rs 150,000 by the end of the tenure of the policy. But with a single premium policy, he will have to pay only Rs 110,000 for the same tenure and sum assured. He saves Rs 40,000 by opting for a single premium.

In case we take inflation into account, however, the situation looks different. At 6% rate of inflation, Rs 110,000 will be worth Rs 263,000 in 15 years. This means that Arjun will be paying much more for the same sum assured in terms of time value of money. This factor must be kept in mind while deciding which policy to choose.

Risk:Life insurance policies are usually long-term instruments, which means Arjun has to buy a policy with a long tenure. If he decides to pay a single premium, he is exposing himself to possible market volatility over the term of the policy. A regular product, contrarily, shields him from market ups and downs as  he gets the advantage of 'rupee cost averaging,' the process that helps average the cost of investment in different investment cycles. This will protect him from market risks.

Tax benefits: Both types of insurance offer tax deduction benefits of up to Rs 1.5 lakhunder section 80C of the Income Tax Act. But regular policies look more attractive when it comes to issues of taxation. Policyholders have the choice of claiming tax exemption for the amount they pay for life insurance policies each year. Tax exemption for single payment policies is available for only the year the policy is bought. Single payment policies are chosen by those who go for unit-linked insurance plans (ULIPs) for investment purposes.

Other advantages: Regular life insurance policies often come with added benefits. They include covers for accidents, illnesses, etc. On the other hand, onetime payment policies don’t have such advantages.

While there are certain advantages of single premium policies, regular ones come with more features. If you are salaried like Arjun, you are better off with a regular policy. You might still go for a onetime payment option, but make sure it fits in with you long-term financial plan. 

Past 5 Year annualised returns as on 01-07-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

Become a crorepati-1
Invest More Get More!
You Get
₹1 Crores*
You Invest
₹10K/month
You Get
₹80 Lakhs*
You Invest
₹8K/month
You Get
₹50 Lakhs*
You Invest
₹5K/month
capital guarantee
Investment Calculator
  • One time
  • Monthly
/ Year
Sensex has given 10% return from 2010 - 2020
You invest
You get
View plans

Investment plans articles

Recent Articles
Popular Articles
Tips for Single Mothers to Financially Secure Their Future

17 Jul 2024

Being a single mother comes with unique challenges, especially
Read more
Market Linked Investment

17 Jul 2024

Market Linked Investments in India are a mix of traditional
Read more
Money Management Tips

04 Jul 2024

Effective money management is important for achieving financial
Read more
ICICI Prudential Capital Guarantee Solution

27 Jun 2024

ICICI Prudential Capital Guarantee Solution is a specifically
Read more
Difference Between Savings and Investment Plans

17 Jun 2024

Savings and investment plans are important financial tools with
Read more
20 Best Investment Options in India in 2024
  • 04 Apr 2014
  • 1844391
Investing in the best investment options in India helps to maximize your returns and fulfill your immediate and
Read more
Best NRE Savings Accounts for NRIs in 2024
  • 28 Jan 2022
  • 27696
India is a growing economy and is getting a lot of global recognition these days. It has shown immense growth in
Read more
Post Office Senior Citizen Savings Scheme (SCSS) 2024
  • 13 Feb 2020
  • 74117
The Post Office Senior Citizen Savings Scheme (SCSS) is a government-backed scheme designed specifically for
Read more
How to Change Mobile Number in Post Office Account Online?
  • 20 Nov 2021
  • 17805
Indian Post Payment Bank (IPPB) is the banking division of the Department of Post (Ministry of Communications)
Read more
Short Term Investments Options
  • 10 Feb 2014
  • 474517
Short-term investments are financial assets that can be easily converted to cash within a short period, ranging
Read more

top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL