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A life insurance plan helps you financially safeguard your family’s future from various risks of life even when you are not around. Depending on the mode of premium payment, an insurance plan can be classified as regular premium life insurance and single premium life insurance.
Table of Contents:
What is Single Premium Life Insurance?
A single premium life insurance is a life insurance plan for which the premium is paid just once unlike the regular life insurance policies, where the premium is paid at regular intervals. The benefits, policy term and coverage offered by the single premium plans are the same as that provided by the regular premium plans. Thus, there is no difference in the functioning of the plan. These provide financial coverage to the family in case of the sudden demise of the policyholder. The only difference lies in the way the premium is paid. Not all plans can be of this type. The single premium payment method can be valid for different types of life insurance plans. It can be in the form of a whole life insurance, endowment, ULIPs and annuity.
Documents Required to Purchase Single Premium Life Insurance
Once you have finalised the provider from whom you’ll purchase the single premium life insurance, the following documents are needed to go ahead with the application process and purchase of the plan:
- Photo ID proof (Aadhar, Pan Card, Driving Licence, etc.)
- Address Proof (valid passport, Aadhaar, Ration Card, utility bills, etc.)
- Passport-size photographs
- Application/Proposal Form
Note: This is not an exhaustive list, it may require addition/omission.
How Single Premium Life Insurance Functions
A single premium life insurance functions just like any other life insurance plan. Here, the payment is made once after buying the insurance after which the plan comes into force.
Claim Process for Single Premium Life Insurance
The process of filing claims for a single premium life insurance is the same as that for a regular premium life insurance. Let us look at the steps:
- Inform the insurance provider about the eventuality after which the claim will be registered
- Submit the duly filled in claim form along with the necessary documents
- On receiving the documents, the company usually appoints a surveyor to scrutinize the authenticity of the claim and verify the documents
- In case of any discrepancy, the same is informed to the claimant, otherwise the claim amount is released
Documents Required for Claim Process
- Policy documents
- Death certificate
- KYC documents of nominee
- Discharge form (executed and witnessed)
- Medical certificate (as proof for cause of death)
- Copy of FIR (for unnatural death)
- Postmortem report (for unnatural death)
- Hospital certificate (death due to illness)
- Certificate from employer (for early death)
Time Taken to Settle Claims
The insurance companies follow the guideline issued by the IRDA and thus, settle the claims within 30 days from the day of receipt of claim documents.
Cases Where You Can’t Make Claims for Single Premium Life Insurance
Claims are not entertained in case of death under certain situations.These are called exclusions. Let us look at some cases which prevent a claim from being entertained.
- If policyholder commits suicide within a year from the commencement of the policy
- Participation in risky sports
- Accident due to drug and alcohol abuse
Companies offering Single Premium Life Insurance in India
All the major life insurance companies in India offer single premium life insurance policies. These plans can be offered under one of the types of life insurance. Some of the companies providing this insurance in India are:
- ICICI Prudential Life Insurance Co. Ltd.
- HDFC Life Insurance Co. Ltd.
- Aviva Life Insurance Company India Ltd.
- Life Insurance Corporation of India (LIC)
- SBI Life Insurance Co. Ltd.
- Max Life Insurance
Important Aspects
When buying a single premium life insurance plan, it is imperative to understand certain points related to the plan so that you are able to take an informed decision. Let us look at some of these aspects:
- Opt for this plan only if you have surplus income, have an irregular income or lack financial discipline
- If you are an individual aged 50 years or more and wish to pass your wealth to your children
- In some of the single premium life insurance policies, like ULIPs, policyholders have the option to increase the fund value by paying additional top-ups as and when you accumulate enough funds for the same.
- The tax benefit can be availed only once, when you pay the premium. This is in contrast to the regular premium life insurance, where you get tax benefits every financial year till you pay the premium
- There is a limit on the sum assured under single premium plan. It should be at least 1.25 times the single premium of the plan
Advantages of Single Premium Life Insurance
- Convenient option for people without a steady cash flow
- Policy becomes fully funded from the first day
- No need to keep a tab of the regular payment cycle
- Insured can take a loan against the insurance after the amount reaches a certain specified limit
- After your death, nominee appointed by you will be able to receive tax free death benefits
- If taken for whole life, some companies may provide dividends to the policyholder (these dividends may be taxable though)
FAQs
Q1. I already have a regular life insurance, Can I buy a single premium life insurance as well?
Yes. For buying a single premium life insurance, it doesn’t matter if you already have a life insurance plan.
Q2. Can I invest more in my single premium life insurance plan later in the future?
Yes. Although this is a one-time premium payment plan, there are options which allow to enjoy more benefits on payment of some extra amount.