Know the difference Between Single Premium and Regular Premium

Life insurances have become one of the most crucial parts of life, especially for each family’s bread-winners. It keeps the financial future of families safe, even if a misfortune happens. However, selecting an insurance plan is not as easy as it seems. There are many factors, like the assured sum, tenure, riders, etc., that have to be taken into account. Out of all these, the payment of premium is an essential factor. You can either opt for a single premium policy or a regular premium policy. In a single premium, you have to make one-time payment while multiple premiums require payment at specific intervals.

But this is not the only difference in both of these options. Here is a list of factors that differ in a single premium policy and a regular premium policy. 

Convenience

It would be wrong to state that one of these options is more convenient than the other. They both have their convenience factors:

• Regular Premium: People who have a full-time regular job find it easier to pay premiums on specific intervals. They have monthly fixed cash flows, so it is more suitable for them to separate small amounts of money than paying everything at once. 
• Single-Premium: People who do not have regular cash flows, like business owners, find it more comfortable to spare out a one-time premium. It permits them to enjoy the benefits of the policy irrespective of their financial future. 

Cost

In a straightforward calculation, the single premium policy seems to be less costly than the regular premium one. It happens because the premiums paid in intervals get paid for the entire tenure of the plan. So the whole amount comes out to be around a few per cent higher than the single amount. However, an essential factor is missed from this calculation, i.e., inflation. If the one-time premium is subjected to inflation over the tenure, it may be higher than the accrued sum itself. 

Tax Benefits

Both, a single premium policy and a regular premium policy, provide the insured with tax benefits of up to 1.5 lac per annum. But there is a small difference here. If someone pays a one-time premium, it will reflect as a single entry in their insurance. So they will be able to avail the tax benefit only once. However, in the case of regular premium, the insured will be paying the amount throughout the plan tenure. Therefore, they can avail the benefits every year until the policy ends. 

Risks And Returns

Last but not least, ‘Risk’ is another factor that can be used to differentiate between a regular premium and single premium policy. As life insurance plans are bought for longer-terms, periodic payments make it safer for the policyholder. The reason for this safety is that the person can change their investment costs through varying market conditions.  

By considering these factors, anyone can easily choose one from single and regular premium. For people who did not understand these points, this video would help them out. They can also talk to their insurers about which one would be beneficial according to your specific requirements. The experts will guide them the best.