Single-premium term insurance can be a game-changer if you are a freelancer or a consultant with an unpredictable income. Instead of worrying about making regular premium payments, you can make a one-time payment and secure life coverage for the long term with this insurance policy.
This is perfect for professionals in volatile fields, as it ensures your family is financially protected even during periods of low earnings.
Scroll through this blog to learn more about the advantages of single-premium term insurance plans for freelancers and consultants.
7 Key Advantages of Single Premium Term Insurance Plans for Freelancers and Consultants
Here are the 7 essential advantages of single premium term insurance plans for freelancers and consultants:
- No Missed Payment Worries
Freelancers and consultants often experience income fluctuations, making committing to regular premium payments difficult. This irregularity can create stress when managing financial responsibilities like insurance.
In a single-premium term insurance policy, you pay the entire premium simultaneously, reducing the probability of missing future premiums. Therefore, you will not stress or have to search for ways of making a payment to meet the deadline before policy expiry.
In this way, you can take care of business and live with the assurance that coverage is provided for life; thus, there is no need for frequent payments.
- Cost-Effective
In the long run, a single premium term insurance policy can be more cost-effective than policies with regular premiums. When you pay the premium upfront, you often receive a discount, which means you end up paying less overall than if you were to spread payments out over many years.
This is particularly advantageous for freelancers and consultants whose earnings may be less stable than they desire. Instead of continuous payments to meet some obligations here and there, with the insurance premium, there is a one-off payment, which makes the entire process much easier.
- Guaranteed Death Benefit
The core purpose of a term insurance policy is to provide a financial safety net for your family in case of an untimely demise. A single premium term insurance policy ensures that your dependents will receive a guaranteed lump sum death benefit if the life assured passes away during the policy term.
This payout offers much-needed financial stability to your family during difficult times, covering expenses like loans, daily living costs, and any unforeseen expenditures that may arise.
- Ideal for Windfall Gains
Freelancers and consultants often have irregular income patterns but may occasionally experience a significant influx of funds from a large project, bonus, or business profit. A single premium term insurance policy is an excellent way to use this windfall to secure long-term financial protection.
Instead of letting the extra funds sit idle or tying them up in uncertain investments, you can channel them into a single premium policy. This will ensure that your insurance is fully paid for and your family is protected without affecting your future cash flow.
- Flexible and Customisable
One significant advantage of single-premium term insurance is its flexibility. Freelancers and consultants can customise the coverage amount, policy term length, and additional features to suit their specific needs and preferences.
Whether you want a higher coverage amount or a shorter policy term, single premium plans offer the flexibility to adjust the policy according to your financial goals and risk appetite. This ensures that your chosen policy aligns with your lifestyle, providing personalised protection without the burden of ongoing premium payments.
- Peace of Mind
Having peace of mind is critical, especially with an unpredictable income. With a single premium term insurance policy, you do not have to worry about future payments.
Once you make that single payment, your coverage lasts for the entire policy term, ensuring that your loved ones are protected without the hassle of ongoing payments. Freelancers and consultants can rest easy knowing that, regardless of income variations, their family is financially protected in any unforeseen event.
- Tax Benefits
Although you make only one payment in a single premium policy, you still enjoy tax benefits under Section 80C of the Income Tax Act. You can claim a deduction of up to ₹1.5 lakh in the year of the premium payment, reducing your taxable income for that financial year.
Additionally, the death benefit paid to your family is fully exempt from taxes under Section 10(10D), ensuring they receive the full payout without any deductions. This combination of upfront tax deductions and long-term financial relief makes single premium policies attractive for freelancers and consultants looking to optimise their tax planning while securing their family’s future.
Things to Consider When Buying a Single Premium Term Insurance
When considering purchasing a single premium term insurance policy, it is essential to assess several factors to ensure the policy fits your financial goals and needs. Here are key aspects to keep in mind:
- Coverage Amount: Figure out the right amount of coverage to protect your loved ones and meet your financial responsibilities.
- Policy Duration: Select a policy term that aligns with your long-term financial objectives and future plans.
- Affordability: Make sure you can comfortably afford the lump-sum payment without risking your financial stability.
- Adjustable Coverage: Check if you have options to modify your coverage or add extra benefits, such as riders, when necessary.
- Riders: Look into additional covers, such as those for critical illness or accidental death, which can provide extra security.
- Surrender Charges: Understand the charges that apply if you need to cancel the policy early and how these fees decrease over time.
- Tax Benefits: Be aware of the tax deductions available for your premium and any tax implications if you decide to surrender the policy.
- Death Benefit: Ensure that the payout aligns with your financial planning and will adequately support your beneficiaries.
- Policy Features: Review the policy’s overall benefits, including the death benefit and any additional features or riders included.
- Fixed Premium: Since single premium policies require a one-time payment, consider if this fixed-cost approach suits your current and future financial situation.
- Terms and Conditions: Carefully review the policy’s terms, conditions, exclusions, and limitations to understand your commitment fully.
Therefore, single-premium term insurance provides freelancers and consultants with an efficient and convenient option for obtaining lifelong coverage. Thus, understanding its benefits, it is wise to ensure that you have financial security for your family.
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