Single vs. Multiple Insurance Premiums – Which is better?

Is a single insurance premium better than paying multiple premiums? Here’s looking at what you should ideally do.

You can either choose a single insurance premium or pay multiple insurance premiums. You have to make a sensible choice when it comes to your insurance policy since there is nothing as the best insurance policy in India. It all depends on what you choose and the parameters behind the same. While we assess insurance plans based on several aspects like the coverage amount, tenor, insurance claim process and claim settlement ratio, the single premium or multiple premium payment conundra has existed for a long time.

You have to decide whether you wish to pay off the whole premium together or at regular intervals like quarterly, monthly or semi-annually. Take into account costs when it comes to premium payment frequencies. Paying up a single premium may not always be the cheaper option.

When you take into account inflation and the duration of the policy, the calculation will be clearer. Work out what you are paying and what it amounts to. There is also the question of affordability since single premiums will naturally be costlier when paid upfront and periodic payments may be lighter on your pocket. If you have some surplus funds which are idle and can be locked away in insurance, choose single insurance premium payment or go for periodic payments.

Paying just one premium is more convenient since you do not have to worry about the same for the rest of the year. There is also a certain amount of risk that you have to think about. Insurance plans are for the long haul and you have to purchase policies of at least 10 years or even more.

If you are investing all at once, you are more vulnerable to any market risks or volatility for the remainder of the year. Paying premiums periodically, however, will keep you safeguarded against market volatility via rupee cost averaging. Both types of products give you tax benefits up to Rs. 1.5 lakh under Section 80C as you must already know. However, with a single premium plan, you can get the benefit just once while with multiple premiums, you can get the same benefit throughout the entire duration.

Paying regularly, i.e. multiple premium payments would be a better option if you wish to safeguard yourself against any market risks and also wish to avoid locking a considerable chunk of money for a certain period of time. If you have a windfall gain or surplus funds, you may consider single premium payment only after you have taken everything else into account.

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