Before switching to single premium hazard insurance, it is important to know what hazard insurance is. Term insurance is one of the simplest types of insurance products. The insurance company guarantees that in the event of the death of the insured, a fixed amount will be paid to the nominee, provided that the policyholder unconditionally pays the premiums. Risk insurance plans do not have any investment component and end after the contract period expires. Payment of premiums is an important aspect of a temporary plan. Regular hazard insurance plans have a monthly, quarterly, or annual payment plan. However, you can also opt for single risk insurance plans. With single premium risk insurance, you have the option of paying the premium as a lump sum for the entire term of the contract.
If you are someone like Ramesh with a fluctuating income, single premium insurance may be a good option for you. Regular insurance policies have premium payment terms for several years, which is a long-term commitment. Since you have to pay a flat fee for single premium insurance, this is slightly more expensive than regular risk insurance. The ideal scenario for purchasing single premium risk insurance is when you have significant funds to spend or have received a large donation of cash or profit from your business.
Advantages of a single premium insurance
Buy it and forget it: With single premium insurance, you don’t have to worry about tracking your policy and making regular premium payments. You only have to pay once and the policy remains active until the end of the policy term. If you lose a term insurance premium, the insurance company generally grants a grace period for payment. However, if you fail to pay or fail to pay even after the grace period has expired, the policy will expire. Expired term insurance is useless, as the claim will be denied if your family needs it while you are away.
Life without stress: Risk insurance ensures that your family remains financially secure even in your absence. With the premium paid as a lump sum, your family is protected from the complexities of politics. You only need to file a complaint in the event of an unfortunate incident. Single premium insurance can also be used as collateral when obtaining a loan if you create an asset by paying the insurance premium.
Tax Advantages: Single-Premium Insurance offers a variety of tax advantages. The premium paid on the policy is deductible up to Rs 1.5 lakh under Section 80C of the Income Tax Act of 1961. Death benefits paid through hazard insurance are exempt from tax in accordance with Section 10 (10) EStG. . According to the law, the premium cannot exceed 10% of the insured sum in one year. In the event that the premium is greater than 10% of the insured sum, only the premium of 10% of the insured sum may be deducted. However, the buyer of risk insurance does not have to worry about the upper limit, as the sum insured for risk insurance is usually substantial, while the premium is relatively low.