Single Premium or Regular Premium: Which ULIP Should you Choose?

2024-08-02

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LIP policies have become a priority for many people when it comes to buying life insurance. ULIP offers two choices to the policyholder for making life insurance payments - a single premium life insurance and a regular premium. Before you can figure out which payment option is the best for you, let's understand what exactly is ULIP.

In a ULIP, the insurance holder is eligible for insurance and investment benefits in a single plan. Unit linked insurance plans serve a product with dual benefits. ULIP invests a small amount to secure your life and, the remaining money is invested in the market. In ULIP the policyholders can pay the premiums either monthly (regular) or annually (single).

ULIP: Single Premium Policy Vs Regular Premium Policy

In a single premium ULIP, the insurer avails the benefit of the policy by paying the entire amount of premium in a single instalment. In a regular premium ULIP, the insurer avails the benefit of the policy by paying the premium amount after a fixed period. The periodicity in regular premium ULIP can be monthly, quarterly, half-yearly, or annually, depending upon policyholder’s requirements.

Before deciding to invest your hard-earned money in a ULIP, let us know which premium option is suitable to choose. The suitability of the ULIP varies from person to person individually. The following factors will help you to differentiate between the Single premium and the Regular premium ULIP.

1. Convenience

Generally, a single premium life insurance policy is supposed to be more convenient than a regular premium policy because of the single payment facility. The policyholder has no worries once the premium amount is paid the insurance company takes care of the rest.

In a regular premium policy, the policyholder has to remember the dates of instalments plus it can be a time-consuming process to send in the payments. Regular premium policies have become a convenient choice due to the facility of automated payment systems.

2. Tax Benefits

Under Section 80C of the Indian Income Tax Act, the policyholder can avail the tax benefit up to ₹1,50,000 on the annual premium paid for a life insurance policy. Section 80C acts the same for both single premium policy and regular premium policy, hence the limit is set as the same for both.

The only difference between a single premium policy and a regular premium policy would be, in a single premium the policyholder can only avail of the benefit for that particular year and in regular payment, the policyholder can avail of the benefit of Section 80C till the term end of your insurance policy.

3. Affordability

While selecting ULIP premium choices, financial planning also plays a vital role. Choosing a single premium insurance policy will allocate a significant amount of money towards the insurance policy. This payment might disturb the budget or financial stability for that particular year. While a regular payment plan supports uniform outflow of the total premium. Such an instalment system is quite suitable to incorporate the budget.

4. Premium Amount

An insurance policy serves as a long term investment. In which case a single premium policy can be opted to invest a large sum of money. Single premium policies are meant for high premiums. While in a regular premium policy, the policyholder has to worry about regular payments till the maturity of an insurance policy. But the premium amount is lower if compared.

5. Customizability

Both types of ULIP premiums can be customised. The difference between a single premium and the regular premium would be, single premium insurance policy requires payment of a significantly larger lump sum to customise and in the regular premium payment plan, the amount is less as the premiums are to be paid over 15-20 years.

6. Risk

Every investment suffers some kind of risk. Insurance policies are long term investments in which the money gets stuck until the maturity of the term ends. In a single premium policy, the individual pays a larger premium and exposes themselves to severe market conditions.

While in regular premium policy the rupee cost averaging is considered. Spreading a larger sum across a period saves the policyholder from extreme market conditions.

7. Maximum Returns

Single-Premium ULIP offers maximum possible return as there is no chance of getting into discontinuity of funds. While in regular ULIP, shortage of money within the initial period of 5 years might cause the policy to shift in discontinuity funds. This will further result in minimum returns.

The Invest 4G Plan by Canara HSBC Life Insurance is an individual-oriented product under the ULIP. With the option to combine and manage different portfolios, the plan gives the policyholder complete control over their savings. It enables the insurer to customize the plan according to the changing requirements. Policyholders can enjoy the benefits of full coverage with limited premium pay and a convenient number of instalments. It offers fund value related Loyalty Additions. Starting from the end of the 5th policy year within every 5th year until the end of the Premium Payment Term.

The regular premium insurance plan can have a longer period of 15-20 years; this plan is most suitable for salaried individuals along with a family. While single premium insurance plans have a shorter period, individuals who wish to invest a large sum of money safely can opt for a single premium insurance plan.

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