What would your response be to an investment product, which provides you some life insurance, reduces the hassle of regular premium payments and at the same time is eligible for tax benefits? There is a fair chance you will like this product.
A Single Premium Policy, unlike usual insurance policies where you contribute towards your plan every year, allows you to pay a lump-sum premium. This plan provides you an opportunity to invest for a minimum tenure of 5 to 10 years (extendable up to 30 years in some cases) at the discretion of the policyholder.
To opt for a single premium policy, you have to pay the premium (starting from Rs 900 per thousand) and on maturity or claim, you get the entire amount along with the bonus accrued. For example, for a policy of Rs 100,000, you will have to pay Rs 90,000 and on maturity or death claim, you receive Rs 100,000 plus the bonuses. Of course, the entire maturity amount is tax-free.
This kind of policy is best suited to a person who has a surplus fund and would like to invest it for a longer duration. The bonuses, guaranteed by some insurers, are compounded providing the policyholder the benefit of higher returns.
The most advantageous benefit of this policy is that the premium paid towards this plan carries the tax benefit under section 88 and the entire amount on maturity or claim, that is, the sum assured and the bonuses are also tax-free. In other words, this is largely an investment product with the tax benefits of an insurance policy.
It is important to understand that single premium products are more investment-oriented than insurance-oriented. So investors who have surplus funds and are looking at investment avenues like fixed deposits, bonds and mutual funds, can consider investing in a single premium policy. In terms of safety and tax efficiency, a single premium policy could be more effective and rewarding than other comparable investments.
If you are in Mumbai and are interested in the Single Premium Policy of HDFC Standard Life, please register here.
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