Single Premium ULIP plans vs Regular Premium ULIP plans

Individuals who are disciplined for regular investing and looking for a good long term investment option backed with life cover and do not mind the 5-year lock in period should be investing in regular premium ULIPs.

There has been a recent spike in the sale of single premium ULIP plans as compared to regular premiums. In the single premium plan, an insurer gets coverage for full term by paying premium amount in a lumpsum. Whereas, in regular premium ULIP plan, an insurer needs to pay premiums in intervals such as monthly, quarterly, half-yearly or annually for the policy.

The private sector insurers registered a hike in the growth of 54.75% in the single premium segment in April-June 2018 at the same time the regular premium grew just 3.84% during the same period.

Investors have taken into account the Long Term Capital Gains (LTCG) tax on equity mutual funds, post the announcement in the Union Budget and hence there was an overall growth in ULIP sales. New plans have lower charges and are more transparent so it's gaining investors' confidence. Let's understand key differences between single premium and regular premium ULIP plans for investors to take informed decisions before opting for one.

Why investors are opting for single premium ULIP plans?

While buying a single premium ULIP plan, a buyer of the policy needs to have a lumpsum amount to invest in existing or new schemes getting launched. Lumpsum investors have always been a key chunk of the market. This is mainly because a good proportion of the customers have a good amount of investible surplus right now, but they shy away from the commitment of recurring investments in regular premium ULIP plans.

We see a spike in sales as many companies are launching single premium insurance plans where product offering and pricing is better than the existing plans."

Who should be investing in single premium or regular premium ULIP plans?

Single premium ULIPs should be bought by individuals who can afford its expensive premium. Even individual with uneven cash flows can invest in such a mode as their future premiums might be uncertain.

Investors who have unexpected windfall gains like bonuses, profits, huge income from property sale, etc. also investing their gains in these single premium plans.

Lastly, individuals who want to avoid the hassle of regular payment of premium should be investing in the single premium plan.

Individuals who are disciplined enough for regular investing and looking for a good long term investment option backed with life cover and who do not mind the lock in period of 5 years should be investing in regular premium ULIPs

The positives and drawbacks of single and regular premium ULIP plans

Illustration of fund value comparison in single premium vs regular premium ULIP plans

In ULIP products, the premiums remain same since you choose how much you want to invest. It is the output, the maturity amount that differs, basis the cost of the product, which is a net of all the charges it deducts and the additional allocations it gives. Also, you cannot simply compare the maturity fund values for regular and single premium, since the former has repeated investment inflow, while the latter just grows on the initial investment amount.

Tax benefits

In single premium ULIP plans, if the premium paid in a year is more than 10% of the sum assured of the plan, then the total premium is not eligible for tax exemption.

Example:

If the annual premium of a plan is Rs 35,000 and cover amount is Rs 1,75,000, therefore, only Rs 17,500 which is 10% of sum assured (Rs 35,000) will be tax-free and not the entire amount of Rs 35,000 will be exempted from tax.

Be careful while investing in single premium investment plans and check if the annual premium is less than 10% of the sum assured as this criteria is very often not met in such plans. The premiums are not fully tax exempted under Section 80C, also the maturity amount is also fully taxable.

On the other hand, regular premium ULIP policy will provide you tax deduction benefit continuously i.e. over the tenure of the policy under section 80C.

You can also avail tax benefits of up to Rs 1.5 lakh over a period of 15 years (tenure of the policy).

Hence, a single premium ULIP plan can be a shortcoming when compared with the regular premium ULIP plan.

Regular premium ULIP plans are value for money in uncertain demise of policy holder

When it comes to value for money, regular premium ULIP plans are more value for money. Suppose the policyholder meets an untimely death prior to the end of the policy term, the nominee need not pay the pending premiums once the sum assured is received. While in case of single premiums wherein you pay the entire premium in one go, if the policyholder dies during the term they would have unnecessarily paid for the future premiums

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

SBI Magnum Tax Gain Scheme 1993 Applcation Form

https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment. After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes. While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

IDFC Mutual Fund has announced dividend under the dividend option of IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be R 4.3464 per unit. The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]

Invest in Tax Saving Mutual Funds	Download Any Applications
Transact Mutual Funds Online	Invest Online
Buy Gold Mutual Funds	Invest Now

Invest in Tax Saving Mutual Funds	Download Any Applications
Transact Mutual Funds Online	Invest Online
Buy Gold Mutual Funds	Invest Now

Prajna Capital - An Investment Guide

Search This Blog