Life insurance: Investors bet on single premium plans; Amount paid under these is lower than regular premium plans

financialexpress.com:

Individuals are preferring to buy single premium life insurance policies because of higher interest rates, convenience and flexibility the plans offer. The share of single premium to total premium has grown to 70% in May this year as compared to 55% in December last year. For private insurers, the share rose to 53% from 43%, and for Life Insurance Corporation, it grew to 82% from 70% during the same period.

The one-time payment options seem to be ideal for those who do not have a regular income. It gives them the flexibility to invest the investiblesurplus in one shot, choose the amount of coverage and get an associated life cover. The single premiums are fixed payments and do not change as per inflation which otherwise would be the case in regular payment options.

Rakesh Goyal, director, Probus Insurance Broker, says single premium policies provide a sense of financial security by allowing policyholders to lock in their coverage and potential growth upfront. “The growing awareness and understanding of the benefits associated with single premium policies have contributed to their increased sales, as individuals recognise the value they offer in terms of immediate coverage and potentially higher cash values or death benefits.

Similarly, Ashish Lath, business head, InsuranceDekho, says when interest rates are rising, it makes sense to lock in a high rate of return on your investment. “Single premium policies offer this option, as the entire premium is invested upfront,” he says.

Word of caution

While buying a single premium policy may be convenient, individuals must note that once they have purchased a single premium policy, they cannot change the amount of coverage or the investment options. The high upfront cost of