What is Single Premium in ULIP?
When we talk about single premium, the name helps us understand that a policy with single premium is where you need to pay the complete premium amount all at once, rather than paying in parts. Once your premium has been paid, your policy continues without any hindrance since you have paid your premium at one go.
What is a Regular Premium in ULIP?
A regular premium ULIP is where you pay the premium in installments like monthly, quarterly, half-yearly or yearly, throughout the policy term.. This type of premium payment also encourages the habit of disciplined investing since you pay premiums consistently over fixed duration of time.
Differences Between Single Premium and Regular Premium ULIP
The table will help you understand the difference between single premium and regular premium:
Parameter
| Single Premium Policy
| Regular Premium Policy
|
Payment method
| A single premium policy requires you to make a one-time lump sum payment at the start of the plan. There are no further payments during the policy term.
| You can choose to pay this in either monthly, quarterly, half-yearly or yearly structures.
|
Affordability
| Since it requires a large upfront amount, it may not be suitable for everyone. It's better suited for individuals with surplus capital who prefer a one-time investment .
| They spread the premiums over a period of time and are generally more manageable for individuals with a steady income. .
|
|
|
|
Risk factor
| These may carry more risk since you invest a large amount at once.
| These are less risky because you have spread out the payments, helping reduce market risk over time through rupee-cost averaging.
|
Tax benefits
| Tax benefits are available in the year the premium is paid, but only once.
| These plans allow you to claim tax benefits every year on premiums paid, under Section 80C. (old tax regime)
|
Which offers the best benefits?
The number of benefits offered by both the ULIP plans is another major factor that plays a pivotal role in deciding which plan one should pick. Here is a deep insight of the benefits of both the plans.
Benefits of Single premium ULIPs
As far as benefits of single premium ULIP are concerned, we can easily vouch for a one-time payment as it gives you peace of mind from remembering premium due dates. Once your premium has been paid, it continues without any hindrance since you have paid your premium at one go. Further explanation of these benefits can be given as:
- No fear of policy lapse - As you are going to pay your premium amount in one go, you can set yourself free from the fear of policy lapse.
Benefits of regular premium ULIPs
- Tax Benefit – Single premium ULIP plans offer a one-time tax benefit across the tenure of the policy, while regular premium ULIP allows an investor to get tax benefits up to Rs. 1.5 lakh on the premiums paid every year as per Income Tax Act 1961, subject to provisions contained therein.
- Rupee cost averaging benefit – The regular premium payment ULIP plan offers you the rupee cost averaging benefits through way of systematic investment over a period of time.
- Systematic investment – With Regular Premium ULIP, you can actually have a systematic investment plan where you can invest small amounts over time and adjust your investment capacity as per your spending capacity. You can make monthly, quarterly, half-yearly or yearly investment plan and align it with your other financial needs.
Important Considerations Before Selecting Single Premium or Regular Premium ULIP Plans
- Your investment capacity – As we have clearly mentioned that Single Premium and Regular Premium ULIPs asks for different sort of premium payment, it is suggested to know your investment capacity in advance. If you have a huge sum readily available, then Single Premium ULIP is better option. However, if you want to invest small amount of money over a period of time Regular Premium is a good option.
- The convenience factor – One may tend to forget a few stuff in the heat of a moment or due to a busy schedule. To avail the maximum benefits of your ULIP, it is important to pay premium on time. Any missed instalment may lead to a policy lapse. Single Premium ULIPs saves you from this situation.
Both the schemes have their own benefits and serve the investment purpose at different dimensions. Being an investor, you have to pick the best ULIP plan as per your need and investment capacity to churn out the appropriate benefits. So, make a wise decision and keep on investing.
Conclusion
Both single and regular premium options in ULIPs have their advantages. Your choice depends on your financial comfort and long-term goals. If you prefer a one-time investment, a single premium plan may suit you. On the other hand, if you want to manage payments gradually, regular premium plans offer flexibility. Understanding your income flow and financial protection needs will help you make the right decision.
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