Simplifying Life Insurance in India
What is the Difference Between Single Premium and Regular Premium in ULIP
Unit-Linked Insurance Plans, or ULIPs, are being widely used today and are chosen by many as their preferred life insurance cum investment plans. It offers you two options to make premium payments, a single premium and a regular premium. Both offer the dual facility of life insurance and market investment.
However, before you invest in ULIPs, you must be aware of the features and benefits that each option offers. Read about the difference between single premium and regular premium to gain better insight.
What Is Single Premium ULIP Plan?
Under life insurance policies, a single premium ULIP plan is an investment plan that offers you financial security as well as insurance in one go. It lets you pay the insurance premium in a lump sum.
Thus, it can be a feasible option if you can make a significant investment at once instead of making regular repaying commitments.
What Is Regular Premium ULIP Plan?
Difference Between Single Premium ULIP Vs Regular Premium ULIP
Both single and regular premium plans offer great benefits if aligned with your financial goals and future plans. Given below are the key differences between the two:
|
Features |
Single Premium Plans |
Regular Premium Plans |
|
Convenience |
More convenient option as you do not have to worry about payment delays, inability to meet the payment deadline, etc. |
You have to pay your premium instalments regularly within the due dates without forgetting. Therefore, it could be a hassle. |
|
Affordability |
These are less affordable if you are not backed with a strong financial support to pay a large sum at once. |
Regular payment plans are more affordable, as you have to pay smaller amounts at regular intervals. |
|
Tax Benefits |
As per Section 80C of the Indian Income Tax Act, you can get a tax benefit of up to ₹5 Lakhs only for the year you pay the premium. |
In this option, you will receive tax benefits every year till the end of your plan’s tenure. |
|
Premium Amount and Frequency |
Since insurance policies are long-term investment plans, the total investment amount generally stays on the higher end. |
You have to pay a smaller amount each instalment, but at regular intervals till the plan matures. |
|
Risk |
The risk is much higher as you pay a large amount of premium at once, exposing you to risks and volatile market conditions. |
The risk is lower as you pay a smaller amount across a more extended period and benefit from the averaging cost of the market fluctuations. |
|
Customisability |
Less customisable, as you may not be able to add rider options because of the fixed and one-time premium payment. |
With regular premium options, you can add on benefits and increase your premium amount accordingly. |
|
Maximum Returns |
Less chance of discontinuation as there will be no payment miss. Hence, you will receive maximum returns. |
If you fail to pay your premiums regularly, there is a chance of discontinuation within the first 5 years. Therefore, there is a chance of minimum returns. |
From the above table, you can have a better understanding about how single and regular premium plans operate. So, if you have a secured cash flow from other sources, and want to secure maximum benefits for your loved ones in the future, opting for a single premium plan would be favourable. On the contrary, if you are looking for affordable premiums with added rider facilities, choosing the regular premium option would be wise.
Going through the difference between single premium and regular premium, you can gauge which type of ULIP plan suits your financial goals better. While one offers a guaranteed benefit of maximum returns, the other offers customisability and affordability.
Moreover, with regular premium plans, you can reduce exposure to market risks by paying smaller premiums. Therefore, before you opt for one, you must do a thorough research and assess your needs and goals to make a wise choice.
Frequently Asked Questions
What are the different ULIP investment options?
In ULIP, you can invest a portion of your premiums as life insurance and the other portion in any market based investment plan such as:
- Equity fund
- Debt fund
- Balanced fund
- Cash funds
- Liquid funds
When should I start planning for my ULIP plan investments?
Why is ULIP a dual benefit option?
When can I withdraw from my ULIP investment?
Important Guides related to Life Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
