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All You Need To Know About Single Premium Term Insurance

All You Need To Know About Single Premium Term Insurance

Term insurance premium

Ramesh, a freelance animator, received a substantial amount from his father. He wants to invest the money but has not finalised the financial products. When his friend Amit advised him to buy a term insurance plan, Ramesh was confused. He thought of term insurance as a long-term commitment and as a freelancer, Ramesh was hesitant to commit to regular payments. Amit told him about single premium term insurance and how Ramesh can secure his family’s future by paying a lump-sum amount.

What is single premium term insurance?

Before moving on to single premium term insurance, it is important to know what is term insurance? Term insurance is one of the simplest types of insurance products. The insurance company assures a pre-decided amount to be paid to the nominee in the event of the insured’s death on the condition that the policyholder pays the premiums without fail. Term insurance plans do not have any investment component and terminate after the policy term gets over. The payment of premiums is an important aspect of a term plan. Regular term insurance plans have a monthly, quarterly or annual payments plan, but you can also opt for single premium term insurance plans. With single premium term insurance plans, you have the option to pay the premium for the entire policy term at once as a lump-sum amount.

When should you opt for single premium term insurance?

If you are someone like Ramesh with a fluctuating income, a single premium term insurance could be a suitable option for you. Regular term insurance policies have premium payment tenures stretching over several years, which is a long-term commitment. Since you have to pay a lump-sum amount for a single premium term insurance it is slightly more expensive than regular term insurance. The ideal scenario to buy a single premium term insurance is if you have considerable funds which have to be utilised or have received a hefty cash gift or earned windfall gains in business.

Benefits of single premium term insurance

  • Buy and forget: With single premium term insurance, you do not have to worry about monitoring the policy and ensuring regular premium payments. One just has to pay once and policy remains active till the end of the policy term. In the case of regular term insurance plans, if you miss a premium, the insurance company generally gives a grace period for payment. However, if you do not pay or miss the payment even after the grace period, the policy lapses. A lapsed term insurance policy is of no use as the claim will be rejected when your family needs it in your absence.
  • Stress-free life: A term insurance plan ensures that your family remains financially secure even in your absence. With the premium paid as a lump-sum amount, your family is insulated from complexities of the policy. They just have to file a claim in the event of an unfortunate incident. Single-premium term insurance can also be used as collateral in case you avail a loan as you create an asset when you pay the premium for the policy.
  • Tax benefits: Single premium term insurance policy provides a host of tax benefits. The premium paid for the policy is eligible for deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act,1961. The death benefits paid by a term insurance policy is tax-exempt under Section 10(10D) of the income tax law. As per the act, the premium in a year, should not exceed 10% of the sum assured. In case the premium is more than 10% of the sum assured, only the premium equal to 10% of the sum assured is eligible for deduction. However, a term insurance policy buyer doesn’t have to worry about the capping as the sum assured of term insurance is generally substantial while the premium is relatively small.

Conclusion

A single premium term insurance plan can be a boon for people planning a secure future for their family but do not want to take on long term commitments. One can opt for Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Star Term Plan and choose from multiple coverages and premium payment options. The iSelect Star Term Plan also offers various payout options and additional inbuilt covers.

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Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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