Insurance Plans are one of the must have things in nowadays life, almost every one has done insurance cover for not only for him but also for his spouse, children’s, parents and so on. Insurance can help you in many ways, you can get money when you need it and insurance plans helps you to get home loan or other type of loans too.
When you go buy a insurance plan company put 2 options in front of you, you can pay Premium Amount in a go and then you need not to pay premium again, This is called Single Premium Plan as you are paying amount once. Whereas when you pay insurance premium in small amount over a period of time then its called regular premium plan.
ALSO READ :- What Is Term Plan? Tax Benefits, Riders And More
For Eg :- You want an Insurance plan of 1 Cr, and maturity is after 20 years, then company can provide you option of paying 1.5 Lac (approx) once or pay 20,000 (approx) for 20 year. Actually Single premium is the discounted value of all future premiums.
Regular premium option is good for those who are having regular income and can pay fix amount of premium regularly over a certain amount of time, on the other hand if you have irregular income and don’t know what will be your income in coming days then go with Single premium plan.
Now we take a look on the Pros and Cons of both :-
Pros Of Single Premium Plan
- Good option if you travel a lot and might forget to pay premium,
- Useful for those who had irregular income,
- You can save penalties on late payment of premium as there is no premium for you
- Put burden only in first year only,
- Can get loan on its basis, you can get approx 90% loan of insurance value
Cons Of Single Premium Plan
- You wont get Tax benefit for over the period of insurance as you pay premium in first year only, so you need to look for Tax benefits options in other years.
- Many times additional benefits like critical illness, accidental death, waiver of premium, hospital cash benefit and so on is not available in Single premium Plan.
- This type of plan is risky as you are paying full amount once and then you are expose to market risk.
Pros Of Regular Premium
- Good option for those who have regular income
- Get Tax benefits on every premium paid over the year
- Additional Benefits are always there.
- You wont lose much if you have to break or discontinue the policy as compared with regular one.
- Less risky plan
Cons Of Regular Premium
- You have to pay heavy penalties if you forget your premium,
- Put burden to pay premium every year.
- You wont get loan on the basis of Regular premium or banker wont give much importance to it.