Single or Regular Premium, Which is Better?
Flexibility: With the option to top up a policy by paying lump sum a regular premium policy can be made use in the best possible way. This is a bit more advantageous than buying new policy with single premium payment. This facility is not provided for all policies but wherever it is provided the pay is worth it.
Considering all the points mentioned above single premium plans are yet opted by many people in the market today. One of the major reasons for this is that people today lack discipline in financial savings. Single premiums are hassle free in a sense that the policy holder need not have to be aware of the due date to pay regular premium.
Nevertheless, when there is a windfall and you are in the receiving end of a onetime payout, as in the case of Vinay, a single premium policy can work well.
One of the endowment assurance products of LIC is considered and a comparison is made in this illustration. Consider the age of Vinay to be 36. If he opts for a policy that has sum assured to be Rs 5,00,000 and term to be 10 years then the resulting premiums as per calculation will be as follows.
If Vinay chooses 6 years as his premium payment term then
- Premium for yearly payment = Rs 84,770
- Premium for half yearly payment = Rs 42,818
- Premium for quarterly payment = Rs 21,625
- He would pay a total of Rs 5,08,620 as premium if he goes for yearly payment.
- He would pay a total of Rs 5,13,816 as premium if he goes for half yearly payment.
- He would pay a total of Rs 5,19,000 as premium is he goes for quarterly payment.
- The policy offers Rs 50 per 1000 Rs of sum assured after every year of survival of policy holder.
- For the same condition if Vinay chooses to pay single premium then he will have to pay Rs 4, 03,625.