2024-05-14 5 Min read
0
Unlocking the gateway to financial well-being is on top of our life goal list, especially when protecting loved ones, is an aim plus. Life insurance acts as a key to this gate and allows you to shield your loved ones from the uncertainties of life. Over the last few years, the importance of life insurance has been widely acknowledged. However, navigating the sea of options can leave many scratching their heads.
Choosing the best life insurance options from the multitude of choices is nothing less than solving a complex puzzle. There is so much you need to consider before you make a decision. The policy terms, coverage, and premiums often turn the decision-making process into a maze. It’s not just about securing the future; it’s about finding the ideal fit for individual needs. If you have been thinking about investing in an endowment plan but are now wondering if short-term premiums can be the ideal way forward, you are at the right place. We are going to discuss how, with the right life insurance policy, you can unlock long-term income benefits with short-term premium commitments. Read on to unveil the mysteries concealed within this payment option.
Types of Premium Payment Options in Life Insurance
Different people may have different financial goals, so there are different premium payment options to suit everyone. With most life insurance plans, you can get the following premium payment options:
1.Single pay
As the name suggests, under single premium pay life insurance, you have to pay the premium only once. At the time of purchasing the policy, you have to make the entire premium payment. Hence, there is no need to pay any more premium for the entire insurance tenure.
2.Limited pay
Under limited premium pay life insurance, you need to make the premium payment only for a certain period. For instance, you may invest in a life insurance plan that requires premium payment 10 years from the policy purchase. Once this term is over, you do not have to pay the premium anymore while the policy continues to exist with all its coverages. The premium payment tenure under limited pay is lesser than the policy tenure.
3.Regular pay
Regular pay means you have to pay the premium throughout the policy tenure, or till the policy matures, or you terminate the policy, or till the insured individual passes away. A regular premium payment term helps you to spread the premium in various monthly/quarterly/yearly premiums.
1.Single pay
As the name suggests, under single premium pay life insurance, you have to pay the premium only once. At the time of purchasing the policy, you have to make the entire premium payment. Hence, there is no need to pay any more premium for the entire insurance tenure.
2.Limited pay
Under limited premium pay life insurance, you need to make the premium payment only for a certain period. For instance, you may invest in a life insurance plan that requires premium payment 10 years from the policy purchase. Once this term is over, you do not have to pay the premium anymore while the policy continues to exist with all its coverages. The premium payment tenure under limited pay is lesser than the policy tenure.
3.Regular pay
Regular pay means you have to pay the premium throughout the policy tenure, or till the policy matures, or you terminate the policy, or till the insured individual passes away. A regular premium payment term helps you to spread the premium in various monthly/quarterly/yearly premiums.
Short-Term Premium Commitments
As discussed above, a limited pay premium requires you to pay the policy premium for a specific tenure and not for the entire policy term. Let’s understand the features of short-term premium payment in detail:
1.You pay the premium only for a short-term.
Unlike single-pay premiums where you have to bear the burden of the entire premium at once, under limited pay, you can manage premiums under various payment frequencies. Limited pay also ensures you do not have to keep paying the premium throughout the policy tenure, like in a regular pay option.
2.The chances of a policy lapse are reduced.
When the premium payment is missed, it may lead to the lapse of the policy. Often, people cannot cope with the premium payment frequency and end up losing the policy. With limited premium payment terms, the chances of policy lapse are reduced since you do not have to keep paying the policy for the entire policy tenure.
3.They are more pocket-friendly.
Compared to single-pay premiums, limited-pay premium terms are more pocket-friendly. Since you have to pay the premium for a specific period, you can spread the premium, which lowers the burden of premium payment.
4.Maximise your tax benefits.
Tax benefits u/s 80C of the Income Tax Act of 1961 can be availed for the premium paid towards life insurance. You can avail tax deductions up to ₹1.5 lakhs. Since the premium of limited pay is higher than regular pay, you have a high chance of getting higher tax deductions.
5.Ideal for short-span careers.
For all those people who do not have plans for working for a long time and are aiming for a policy that has a short-term premium, opting for limited-pay life insurance can be ideal. People with short-span careers, like sportspersons and actors etc., may not find it comfortable to pick a plan with a long premium paying term pay. This is where a limited pay plan becomes a preferable option.
1.You pay the premium only for a short-term.
Unlike single-pay premiums where you have to bear the burden of the entire premium at once, under limited pay, you can manage premiums under various payment frequencies. Limited pay also ensures you do not have to keep paying the premium throughout the policy tenure, like in a regular pay option.
2.The chances of a policy lapse are reduced.
When the premium payment is missed, it may lead to the lapse of the policy. Often, people cannot cope with the premium payment frequency and end up losing the policy. With limited premium payment terms, the chances of policy lapse are reduced since you do not have to keep paying the policy for the entire policy tenure.
3.They are more pocket-friendly.
Compared to single-pay premiums, limited-pay premium terms are more pocket-friendly. Since you have to pay the premium for a specific period, you can spread the premium, which lowers the burden of premium payment.
4.Maximise your tax benefits.
Tax benefits u/s 80C of the Income Tax Act of 1961 can be availed for the premium paid towards life insurance. You can avail tax deductions up to ₹1.5 lakhs. Since the premium of limited pay is higher than regular pay, you have a high chance of getting higher tax deductions.
5.Ideal for short-span careers.
For all those people who do not have plans for working for a long time and are aiming for a policy that has a short-term premium, opting for limited-pay life insurance can be ideal. People with short-span careers, like sportspersons and actors etc., may not find it comfortable to pick a plan with a long premium paying term pay. This is where a limited pay plan becomes a preferable option.
Century Royale: Tailored for Prosperity
Star Union Century Royale is a non-linked, non-participating savings plan that offers you numerous benefits. Tailored for your financial prosperity, this endowment plan provides life cover for up to 45 years and becomes a source of income for as long as your policy continues. That’s not all. At the end of your policy tenure, Century Royale provides you with a guaranteed maturity benefit in the form of a lump sum.
So, if you are looking for long-term benefits but want to pay the premium only for a limited period of time, then Century Royale is the one-stop solution for all your needs. Let us take a look at some of the best features of this plan:
1.2 premium terms to choose from:
When you purchase this policy, you have the option to choose between 2 premium payment terms, 7 years and 12 years.
2.Flexibility to choose the policy term:
The various policy term options give you the flexibility to pick a plan that best suits your needs. The various policy term options with SUD Century Royale are:
3.Flexible premium frequency:
You may choose to pay the premium as per your financial comfort. There are two options when it comes to premium payment frequency: monthly and yearly. As per the chosen plan, the premium payment frequency may be affected.
4.Life cover:
Century Royale allows protection. Along with the guaranteed income (GI) benefit during the pay-out period, the life assured also gets sufficient life cover. In case the insured individual passes away during the policy tenure, the nominee is offered a death benefit as compensation.
5.Guaranteed maturity benefit:
Upon surviving the policy term of an endowment plan, the life assured is guaranteed a maturity benefit. The guaranteed maturity benefit differs depending on the premium payment frequency of the plan. Here is the brief:
1.7-year pay premiums
8 times the annual premium is offered as a maturity benefit. It begins in the 10th year of the policy term.
2.12-year pay premiums
15 times the annual premium is offered as a maturity benefit. It begins in the 15th year of the policy term.
The guaranteed income is paid during the pay-out tenure of the policy (it depends on the entry age of the life assured). If the life assured dies during the pay-out tenure, guaranteed income is terminated, and the death benefit is disbursed to the nominee. In case guaranteed income continues to be paid out, the amount is deducted from the death benefit.
6.Enjoy liquidity:
A maturity benefit payout gives you the power of liquid funds. This guaranteed income (GI) adds to your regular income.
7.Tax benefits:
Until 23rd March 2023, endowment life insurance policies offered the EEE, or Exempt, Exempt, Exempt, tax rating. Here, premiums, earnings and maturity benefits enjoy tax deductions. Union Budget 2023 brought a cap on the exemptions for policies bought on or after 1st April 2023. Now, this exemption will be applicable only when the premium payable in any year during the policy term is less than ₹5 lakhs (for all life insurance policies). 1 The death benefit of a life insurance policy remains tax-free under Section 10(10D) of the Income Tax Act of 1961.
Being an endowment plan, Century Royale also offers you tax benefits. Under Section 80C of the Income Tax Act of 1961, a tax deduction of up to ₹1.5 lakhs can be availed. You must note that this annual tax deduction is only possible if your other investments do not exceed the ₹1.5 lakh tax deduction limit. For policies purchased after 1st April 2012, you can get an exemption on the maturity amount under Section 10(10D) if the premium paid on the life insurance policy does not exceed 10% of the sum assured.
So, if you are looking for long-term benefits but want to pay the premium only for a limited period of time, then Century Royale is the one-stop solution for all your needs. Let us take a look at some of the best features of this plan:
1.2 premium terms to choose from:
When you purchase this policy, you have the option to choose between 2 premium payment terms, 7 years and 12 years.
2.Flexibility to choose the policy term:
The various policy term options give you the flexibility to pick a plan that best suits your needs. The various policy term options with SUD Century Royale are:
| Under 7-year pay premium option | Under 12-year pay premium option |
|---|---|
| 25 years | 30 years |
| 30 years | 35 years |
| 35 years | 40 years |
| 40 years | 45 years |
3.Flexible premium frequency:
You may choose to pay the premium as per your financial comfort. There are two options when it comes to premium payment frequency: monthly and yearly. As per the chosen plan, the premium payment frequency may be affected.
4.Life cover:
Century Royale allows protection. Along with the guaranteed income (GI) benefit during the pay-out period, the life assured also gets sufficient life cover. In case the insured individual passes away during the policy tenure, the nominee is offered a death benefit as compensation.
5.Guaranteed maturity benefit:
Upon surviving the policy term of an endowment plan, the life assured is guaranteed a maturity benefit. The guaranteed maturity benefit differs depending on the premium payment frequency of the plan. Here is the brief:
1.7-year pay premiums
8 times the annual premium is offered as a maturity benefit. It begins in the 10th year of the policy term.
2.12-year pay premiums
15 times the annual premium is offered as a maturity benefit. It begins in the 15th year of the policy term.
The guaranteed income is paid during the pay-out tenure of the policy (it depends on the entry age of the life assured). If the life assured dies during the pay-out tenure, guaranteed income is terminated, and the death benefit is disbursed to the nominee. In case guaranteed income continues to be paid out, the amount is deducted from the death benefit.
6.Enjoy liquidity:
A maturity benefit payout gives you the power of liquid funds. This guaranteed income (GI) adds to your regular income.
7.Tax benefits:
Until 23rd March 2023, endowment life insurance policies offered the EEE, or Exempt, Exempt, Exempt, tax rating. Here, premiums, earnings and maturity benefits enjoy tax deductions. Union Budget 2023 brought a cap on the exemptions for policies bought on or after 1st April 2023. Now, this exemption will be applicable only when the premium payable in any year during the policy term is less than ₹5 lakhs (for all life insurance policies). 1 The death benefit of a life insurance policy remains tax-free under Section 10(10D) of the Income Tax Act of 1961.
Being an endowment plan, Century Royale also offers you tax benefits. Under Section 80C of the Income Tax Act of 1961, a tax deduction of up to ₹1.5 lakhs can be availed. You must note that this annual tax deduction is only possible if your other investments do not exceed the ₹1.5 lakh tax deduction limit. For policies purchased after 1st April 2012, you can get an exemption on the maturity amount under Section 10(10D) if the premium paid on the life insurance policy does not exceed 10% of the sum assured.
Conclusion
Choosing the right premium-paying tenure is as essential as choosing the right policy. Century Royale is an excellent choice if you wish for long-term benefits without committing to a plan for too long. Being a limited-pay endowment plan, the policy offers you the advantage of shorter premium durations along with comprehensive coverage. Before you commit to any investment, it is highly recommended that you analyse your financial condition, consider your future goals, and then choose a plan that fits well into your financial plan as well as your budget.
Reference: SUD Life Century Royale | UIN: 142N083V01
Reference: SUD Life Century Royale | UIN: 142N083V01
Sources
1.https://www.sudlife.in/Products/SUDLife_Century_Royale_Brochure.pdf
2.https://economictimes.indiatimes.com/wealth/tax/how-to-buy-life-insurance-to-maximise-tax-free-maturity-amount-after-cbdts-new-curbs/articleshow/103005822.cms?from=mdr
3.https://cleartax.in/s/life-insurance-taxability
2.https://economictimes.indiatimes.com/wealth/tax/how-to-buy-life-insurance-to-maximise-tax-free-maturity-amount-after-cbdts-new-curbs/articleshow/103005822.cms?from=mdr
3.https://cleartax.in/s/life-insurance-taxability
Disclaimer
Star Union Dai-ichi Life Insurance Company Limited IRDAI Regn. No: 142 | CIN: U66010MH2007PLC174472
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
Beware of spurious or fraud phone calls
IRDAI is not involved in activities like selling insurance policies, announcing bonus or investment of premiums. Public receiving such phone calls are requested to lodge a police complaint
