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Get Your Lump Sum Cash to Work for You with Single Premium Plans

Single premium insurance plans are primarily opted for by those who are looking to invest rather than cover their life. In fact, the pay-out in the case of the death of the insured tends to be negligible in such plans. So, who should opt for such plans?

  • Those who have received a sudden but significant sum of money. This sum of money can be anything from your Diwali bonus to the large chunk of money you get when you sell one of your homes.
  • People in professions where steady income cannot be guaranteed for the long term. For example:
    • Celebrities in the Entertainment industry
    • Sportspersons
    • Businesspersons engaged in certain types of seasonal businesses

Single premium plans are very popular in India as a last-minute tax-saving option. However, they are very handy when it comes to building a corpus as well. LIC is the clear leader when it comes to selling single premium plans. There are a multitude of LIC single premium policies to choose from for those who have lump sum cash and are looking to invest for the long term.

Here are the advantages of opting for single premium plans:

  • No hassle of remembering premium payments
  • Customer starts receiving pension-like monthly payments (this is especially important for non-Government employees)
  • No hassle of transferring ECS mandates when closing bank accounts
  • Helps with lump sum cash for important milestones in life; for example, child’s graduation expenses or family vacation

There are several types of single premium plans, each with their own advantages, explained via examples in the following points:

  • Immediate Annuity Plans – There are several types of immediate annuity plans. We have elaborated two types here:
    • Mr. Tiwari sold his home to a friend for close to 1 crore. He invests this money in an immediate annuity plan. He immediately begins receiving monthly pay-outs of close to 7 lakhs/annum till he is alive. After he expires, his nominee receives the entire sum of 1 crore. Surprised? Don’t be. Mr. Tiwari has only been receiving fixed interest on his investment (close to 6.5%). His principal amount is still safely with the insurer.
      [Note that you need to be at least 45 years old to opt for plans of this type | Immediate Annuity plan pay-outs are taxable | There is no life cover]
    • Mr. Nigam also invests 1 crore in an immediate annuity plan. He begins receiving close to 30,000/month till he is alive. After he expires, his spouse continues to receive 30,000/month till she is alive. After she expires, the 1 crore goes to his nominee (his child).
      [Note that you need to be at least 45 years old to opt for plans of this type | Immediate Annuity plan pay-outs are taxable | There is no life cover]
  • Unit-linked Insurance Plans – Mr. Sawant invests 1 crore in a ULIP for a term of 20 years. He chooses the type of fund he wants to invest in; for example, he chooses a high-equity fund for his investment. His money grows healthily along with the market. At the end of 10 years, he can take money out of this plan without any surrender charges. Note that the life cover needs to be at least 10 times the premium amount in order for Section 10(10D) to apply and the eventual pay-outs to be non-taxed.
  • Traditional Endowment Plan – Mr. Mishra invests 1 crore in an endowment plan. He receives a guaranteed sum at the end of the 13th year. Moreover, his life is also covered, and his family’s financial future is protected in case he meets an untimely end. Note that the life cover needs to be at least 10 times the premium amount in order for Section 10(10D) to apply and the eventual pay-outs to be non-taxed.

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You may call 86559-86559 to discuss any of these plans with designated insurance experts. Optionally, you may reach us at support@oneinsure.com.

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