Expert speak: Should you buy a single-premium insurance policies?

Published in Mint on Dec 21 2016, Written by Abhishek Bondia

I prefer regular-premium life insurance, particularly for term insurance. The main advantage of single-premium insurance—to avoid renewal payment— comes at a high cost. For example, if a 30-year-man buys a 30-year term plan, the single premium is about Rs 1.5 lakh for a sum assured of Rs 1 crore. The annual renewal premium is about Rs 7,300. Simplistically, Rs 7,300 over 30 years works out to Rs 2.19 lakh. This appears more expensive than the one-time payment.

If you were to invest this in an instrument earning even 5% per year, the interest itself will cover the annual premium.

An advantage of regular premium is you can stop paying premiums. In single premium, surrender can be difficult in many products.

Single premium makes sense if you have uncertain income and want to pay in one go, or if you live in a remote area with limited banking access.