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Single Premium Term Insurance Plan in India

Regarding life insurance, individuals often seek a solution that provides comprehensive coverage with minimal hassle. Unlike traditional term insurance plans requiring regular premium payments, single premium term insurance allows policyholders to make a one-time lump sum payment at the beginning of the term.

Let us read more about a Single Premium Term Insurance Plan and how this plan can secure your family's future.

What is a Single Premium Term Insurance?

Single Premium Term Insurance is a type of life insurance policy in which the policyholder pays a lump sum amount (the single premium) upfront instead of making regular monthly or annual payments. This single payment covers the entire duration of the policy, providing coverage for a specified term.

This type of insurance plan is ideal for those who prefer the simplicity of a single payment and desire long-term financial security for their loved ones. The maturity benefits of a single premium policy are tax-free under certain conditions. It is advisable to consult tax regulations or a financial advisor for specific policy details.

In the event of the policyholder’s death during the term, the beneficiaries receive the death benefit.

Overview of Single Premium Term Insurance

Features	Description
Plan Type	Single Premium Term Insurance
Premium Payment	Single, lump sum payment at the start of the policy term
Guaranteed Returns	Fixed rate of return on the invested premium, guaranteed for the entire policy term
Death Benefit	A lump sum amount paid to the nominee in case of the policyholder's death during the policy term
Surrender Value	The amount payable to the policyholder if the policy is terminated before maturity. May incur penalties
Loan Facility	Available in some plans, allowing the policyholder to borrow against the policy's value
Tax Benefits	Premiums paid may qualify for tax deductions under relevant tax laws
Entry Age	Typically, between 18 and 60 years
Maturity Age	Usually up to 70 or 75 years
Free Look Period	30 days from receipt of policy to review and cancel if not satisfied.
Eligibility	Varies by provider; generally requires medical underwriting
Riders/Additional Benefits	Optional riders such as accidental death, critical illness, etc.

How Does Single Premium Term Insurance Work?

Single Premium Term Insurance works similarly to traditional term insurance, with the main difference being the payment structure. Here's a step-by-step breakdown:

Application

The process starts with the applicant submitting a policy request. The insurer reviews health, age, lifestyle, and other risk factors to determine eligibility and set the premium. If approved, the applicant pays a single lump sum that provides coverage for the entire policy term.

Death Benefit

Once the policy is active, it remains in force for the chosen term. If the policyholder passes away during this period, the insurer pays the agreed death benefit to the nominated beneficiaries.

End of Term Outcome

If the policyholder survives the full term, the coverage ends. Since it's a pure risk cover, no premium is refunded and no death benefit is payable.

A Single Decision for a Lifetime of Peace

At 35, Sidharth Kumar, a meticulous software engineer and devoted family man, had one non-negotiable goal: Securing his wife Meena and their two children against life’s unpredictability.

After thoughtful research and heartfelt conversations with financial advisors, Sidharth chose a path that matched his foresight—a single premium term insurance policy.

He made a conscious move and locked in a ₹1 crore cover for 20 years with a one-time premium payment of ₹4,00,000.

No recurring payments
No annual reminders
No risk of policy lapse due to a missed deadline.

Had he gone with the regular annual premium of ₹25,000, he would’ve spent ₹5,00,000 over 20 years. That’s ₹1,00,000 more and potentially a lot more stress.

Beyond the savings, this lump sum investment offered something invaluable: uninterrupted protection and complete peace of mind.

Plus, the premium qualified for tax benefits under Section 80C, a bonus on a decision already rich in financial wisdom.

How is a Single Premium Calculated in Term Insurance?

The calculation of the single premium in term insurance involves several factors, including:

Age: Younger policyholders typically pay lower premiums as they are considered lower risk.
Health: Healthier individuals may receive lower premium rates. Medical exams and health questionnaires are often part of the underwriting process.
Coverage Amount: Higher coverage amounts result in higher premiums.
Term Length: Longer policy terms generally require higher premiums due to the extended coverage period.
Lifestyle: Factors such as smoking, occupation, and hobbies can impact the premium, with riskier lifestyles attracting higher premiums.
Gender: In some regions, gender can affect premium rates, with women often paying lower premiums due to longer life expectancies.

The insurance company uses actuarial tables and statistical data to assess risk and calculate the appropriate single premium for each applicant.

Benefits of Single Premium Term Insurance

Here are the significant benefits of Single Premium Term Insurance:

Avoid Policy Lapse

Insurance policies are valid for a long tenure and require regular premium payments on time. A single missed premium payment, be it in any year of the tenure, can result in your policy lapse, irrespective of how many years you have already paid the premium. With single-payment term insurance, you don't need to worry about missing deadlines and can lead a stress-free life.

Higher Flexibility

Enjoy increased flexibility with single premium term insurance compared to traditional policies. Within the terms and conditions of the insurer's product, you can tailor the term length, coverage amount, and additional features to fit your specific needs.

Tax Advantages

Premium payment qualifies for the tax deduction of up to Rs 1.5 lakh per year under section 80C of the Income Tax Act, 1961, and the death benefit is exempt from tax under section 10(10D)*. However, tax benefits are applicable for a premium amount equal to or less than 10% of the sum assured.

Death Benefit

If the life assured passes within the policy term, the policyholder's family will receive a lump sum death benefit.

Cost-Effectiveness

Since the premium is payable once, the amount is lower than the total premiums paid in regular term insurance plans. Consequently, it becomes more affordable due to the reduced financial burden.

Peace of Mind

By making a lump sum premium payment, the policyholder can ensure that their family is safeguarded from financial hardships in the event of an unfortunate circumstance.

Making Use of a Windfall Gain

When one needs to make a lump sum payment for single premium term insurance, it is ideal for individuals who want to make the most of a substantial profit from a business.

Cash-Rich, Time-Poor Individuals

Freelancers, entrepreneurs, or anyone with irregular income can use a surplus lump sum to secure uninterrupted coverage without the hassle of ongoing payments.

Long-Term Planners

Want to lock in life cover for a fixed period without worrying about future premium hikes? A single premium policy gives you that predictability and peace of mind.

Security-First Mindsets

Health can change, but life policy won’t. Once issued, it guarantees coverage for the full term, unaffected by future health or lifestyle changes.

People Involved in Estate Planning

If you are planning your estate and want to include a life insurance policy to benefit your beneficiaries, a single premium policy can be a good option, as it can be used to secure a lump sum payout for your heirs.

Tax-Savvy Investors

Looking to optimize your tax outgo? In many regions, the lump sum premium qualifies for deductions under life insurance provisions like Section 80C.

When to Choose Single Premium Term Insurance?

Single Premium Term Insurance Plans come with their own set of benefits. However, these benefits might apply to one person and not to others. You can assess your situation and requirements and accordingly plan to buy a term plan variant.

Here are a few scenarios where opting for single premium term insurance can be advantageous:

You are in a Profession with Irregular Earnings

When you are in a volatile profession with irregular earning, a single premium term insurance is more beneficial since you need not commit to regular premium payments.

You can buy the plan whenever you have a surplus for investment, thus ensuring that your life is adequately covered even during phases of low earnings.

Certain professions, such as freelancers, artists, or entrepreneurs, often experience fluctuations in income.

You are in a Hectic Schedule

Regular payment term insurance requires disciplined premium payments, regularly and over a good number of years. If you are busy, you might forget to pay the premium on time, which may pose a risk of policy lapse.

In such a case, you might prefer paying the full premium in one go and then forget about the tension of monitoring and ensuring premium payments on time. 

You Have Some Lump Sum Amount in Hand

Single Premium Term Insurance allows you to invest a lump sum amount upfront, which covers the premium for the entire policy term. This eliminates the need for ongoing premium payments, providing peace of mind and financial stability. The lump sum payment ensures that your policy remains active without the risk of lapse due to missed payments.

Additionally, the proceeds from the policy can be used to cover financial obligations, support dependents, or serve as a legacy, ensuring that your beneficiaries receive a guaranteed payout in the event of your death during the policy term.

You Have Received Maturity Proceeds from the Insurance 

Your life insurance policy just matured and you received the maturity proceeds. However, you want to continue the life coverage without investing any fresh amount.

In such a case, consider investing the maturity proceeds in a Single Premium Term Insurance. 

Things to Consider When Buying a Single Premium Term Insurance

When considering a Single Premium Term Insurance policy, evaluating several factors is important to ensure it aligns with your financial goals and needs. Here are key things to consider:

Coverage Amount: Determine the coverage needed to protect your beneficiaries and match your financial obligations.
Policy Term: Choose the duration of the policy based on your long-term financial plans and goals.
Cost and Affordability: Ensure you can comfortably make a single premium payment without affecting your financial stability.
Customizable Coverage: Look for options to adjust coverage or add riders if needed.
Riders: Explore available riders (e.g., critical illness rider, accidental death benefit rider) that can enhance your policy.

Tax Implications of Single Premium Term Insurance

Premiums paid for single premium term insurance policies can qualify for tax deductions under Section 80C of the Income Tax Act in India. However, there are specific conditions and implications to consider:

Deduction Under Section 80C

Eligibility: You can claim a deduction for the premium paid, provided it doesn't exceed a certain limit of the sum assured.
Limit: The maximum deduction under Section 80C is ₹1.5 lakh per financial year.
Tax-Free Death Benefit: The death benefit received by the nominee is entirely tax-free.

Eligibility Criteria

Policies issued after April 1, 2012: The premium must not exceed 10% of the sum assured.

Policies issued before April 1, 2012: The premium limit is 20% of the sum assured.

Tax Implications

Premium Exceeding 10% of Sum Assured: If the premium paid is more than 10% of the sum assured, the excess amount is not eligible for a deduction under Section 80C. Additionally, the maturity proceeds may be partially taxable.
TDS on Maturity Proceeds: If the maturity proceeds exceed ₹1 lakh, the insurer will deduct TDS at the rate of 5%. You can claim credit for this TDS while filing your income tax return.
Taxability of Maturity Proceeds: The maturity proceeds are generally tax-free if the premium paid does not exceed 10% of the sum assured, and if the premium exceeds 10% of the sum assured, the difference between the maturity proceeds and the premium paid is taxable as long-term capital gains. You can claim indexation benefits to reduce the taxable gain.

Annual Premium Payment vs Single Premium Payment

Let's compare annual and single premium payments in term insurance to explore their advantages and disadvantages.

Feature	Annual Premium Payment	Single Premium Payment
Payment Frequency	Paid annually	Paid once, at the beginning
Cost Over Time	Spread over multiple years	One-time lump sum
Initial Financial Outlay	Lower	Higher
Total Cost	Generally higher due to repeated payments	Typically lower due to single payment
Flexibility	More flexible; can discontinue payments	Less flexible; the entire amount paid upfront
Premium Amount	It may vary according to the circumstances (lifestyle habits, health issues, hazardous professions)	Fixed amount at the start
Surrender Value	Typically, no surrender value	May have a small surrender value
Interest on Premium	No benefit from prepayment	Potential savings by avoiding future premium increases
Tax Benefits	Eligible for deduction under Section 80C of the Income Tax Act, up to Rs. 1.5 lakhs	Qualified for deduction under Section 80C, up to Rs. 1.5 lakhs. However, the sum assured should be at least 10 times the premium paid
Suitability	Suitable for those with regular income	Suitable for those with lump sum availability
Impact of Missing Payments	A policy may lapse if payments are missed	No risk of missing payments

How to Calculate Term Insurance Premium

Calculating the premium for term insurance involves understanding various factors. A single premium policy requires a one-time upfront payment and covers the entire policy duration.

To estimate this, you can use Digit's Term Insurance Calculator by entering details such as date of birth and annual income. The calculator provides an accurate premium estimate, simplifying the process of determining the cost of your term insurance.

What Happens When You Surrender Single Premium Term Insurance Policy?

Surrendering a Single Premium Term Insurance means terminating the policy before its maturity date. Once surrendered, the policy no longer provides coverage, and the beneficiaries will not receive any death benefit in the event of the policyholder’s death.

Considering you have paid the entire premium upfront, surrendering the policy can result in a significant financial loss as you will get back much less than what you invested.

Here is what typically happens:

Surrender Charges

Many policies impose surrender charges when terminated early. These charges are typically a percentage of the initial premium or the policy's cash value. Surrender charges usually reduced each year the policy is in force.

Surrender Value

You might receive a surrender value, which is a part of the original premium paid. This amount is generally lower than the initial premium due to charges and insurance costs.

Calculation: Surrender value = Cash value - Surrender charge

99.53% Claim Settlement Ratio For Digit’s Life Insurance - FY'25

When life takes an unexpected turn, every second matters. With a 99.53% Claim Settlement Ratio (CSR), Digit Life Insurance stands as a pillar of trust and reliability. This isn’t just a statistic; it’s a promise to our policyholders.

Every claim tells a story. Whether it was a salaried parent overcoming loss, a child’s future hanging in the balance, or a spouse seeking stability, we acted fast to bring peace of mind to grieving families.

That’s why we are committed to settling genuine claims swiftly, transparently, and with compassion, ensuring that your loved ones receive the support they need when it matters most.

₹2.88 Billion Worth Claims Paid in FY'25

At Digit, we don’t just talk about protecting families; we actually do it. In the last financial year, we paid ₹2.88 billion to families who lost a loved one. That’s a big jump from ₹351.52 million a few years ago, showing how much we have grown and how seriously we take our promise.

Every payout represents a family supported, a future safeguarded, and a promise fulfilled. We make sure claims are settled quickly and clearly, with zero confusion, so families don’t have to worry during tough times.

15,000+ Claims Settled in FY'25

At Digit, numbers aren’t just metrics; they are milestones of real lives touched. We are proud to share that the number of families we have supported through life insurance has soared from just 600 to 15,596 – a 25x growth that reflects the deep trust people place in us. That means thousands more families received the support they needed during life’s toughest moments. It shows how more and more people are choosing Digit to stand by them in their most vulnerable moments.

Solvency Ratio for Digit's Life Insurance in FY'25 is 3.85

At Digit, being financially strong isn’t just a goal; it’s how we earn your trust. Our solvency ratio has grown from 2.07 to 3.85, which means we are more than ready to keep every promise we make.

This number shows we have more than enough funds to pay claims and support families, even in tough times. In fact, our ratio is nearly double the required limit, giving you extra peace of mind.

Because when you choose life insurance, you are not just buying protection; you are trusting us with your family’s future. And we take that seriously.

Disclaimer: Claims numbers include all variants filed under different product categories since inception.

FAQs about Single Premium Term Insurance

All

Features

Scenarios

Financial Benefits

What is the difference in tax benefits between the single premium and regular premium policies?

In a single premium payment plan, the policyholder can avail tax benefits only for a particular year. In contrast, for the regular payment plan, they can claim tax benefits for all the years when the premium is paid.

What if you start smoking after buying a term insurance policy?

In this case, it's best to inform your insurance provider and let them decide. They might increase the premium in some cases and charge the difference, or they might suggest buying a rider that covers the increased risk with an increased premium. In a few other cases, they might not charge the increased premium, depending on the case-to-case basis. 

Can I surrender a single premium term insurance policy?

Yes, you can surrender a single-premium term insurance policy that has been in force for at least two years and the applicable premiums have been duly paid. 

Does term insurance have a cash surrender value?

Term Insurance with a savings component, like the one with the return of premium, only has some surrender values. The pure-term plans don't have any savings component and hence no surrender value.

Is the coverage amount fixed for single premium term insurance?

Yes, the coverage amount is predetermined and remains fixed throughout the policy term.

Can I change the policy term or coverage amount after purchasing single premium term insurance?

No, the policy term and coverage amount are generally fixed and cannot be changed after purchasing the policy.

Can I nominate more than one person as a beneficiary in single premium term insurance?

Yes, you can nominate multiple individuals, such as family members, dependents, or any other person of your choice, to receive the proceeds of the policy. However, it is important to accurately mention the names and shares of each beneficiary in the nomination form when buying the policy.

Is there a possibility of change in the premium of the plan after buying?

In general, term plans in India are offered as level premium plans, which means once you purchase a term plan in India, the premium remains fixed for the duration of the policy.

However, it's important to note that some term plans may include provisions for premium revision based on certain factors, such as Riders, changes in smoking habits, etc. Additionally, some policies may have provisions for premium revisions at specific intervals, such as every 5 or 10 years.

Is insurance premium above 5 lakhs taxable?

Yes, an insurance premium above ₹5 lakhs is taxable because, as per Indian tax laws, if the annual premium paid for a life insurance policy exceeds 10% of the sum assured, the proceeds from the policy may not qualify for tax exemption under Section 10(10D) of the Income Tax Act.

Can a single premium term plan help with tax rebates?

Yes, a single premium term plan can help with tax rebates, as the premium paid may be eligible for tax deductions under relevant tax laws, such as Section 80C in India. However, consulting with a tax advisor is essential to understand the specific tax benefits and implications based on your circumstances.

What is single premium term insurance?

A single premium policy in insurance requires the policyholder to pay the total premium amount at the beginning of the policy term, as opposed to the conventional practice of paying premiums periodically throughout the term, typically on a monthly, quarterly, or annual basis.

Can we pay term insurance with a one-time payment?

Single premium term insurance is a form of insurance in which a single lump sum is deposited as the entire premium at the time of buying the policy in exchange for a guaranteed death benefit that remains in effect until the policyholder passes away.

Is a single premium term insurance tax-free?

No, the death benefit of a single premium term insurance policy is generally tax-free under Section 10(10D) of the Income Tax Act. However, tax benefits under Section 80C for the premium paid may have certain conditions.

What is the surrender value of a single premium policy?

The surrender value of a single premium policy is the amount of money a policyholder receives if they terminate the policy early. It is calculated by subtracting applicable surrender charges from the policy's cash value.

Is it good to pay single premium term insurance?

When you have extra funds and want to utilize them effectively, opting for a single premium term insurance plan is a good idea. Conversely, if someone is still determining if they are able to make regular premium payments, a single payment term insurance plan would be ideal.

What is the advantage of a single premium policy?

The advantage of a single premium policy is its simplicity. You make just one payment upfront for the entire policy term, eliminating the need for ongoing premium payments and providing guaranteed coverage for the chosen duration.

What is the disadvantage of a single premium policy?

The main disadvantage of a single premium policy is that it requires a large lump-sum payment upfront, which can be financially burdensome. Additionally, if you need to surrender the policy early, you may face high surrender charges and receive less than what you paid.

What is the difference between single premium and annual premium?

A single premium means paying the entire insurance cost upfront, while an annual premium involves making yearly payments throughout the policy term.

What is single premium vs flexible premium?

A single premium means you pay the entire insurance cost upfront, while a flexible premium allows you to pay in installments over time.

Is a single premium eligible for 80C?

Yes, single premium life insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act, subject to certain conditions:

Premium should not exceed 10% of the sum assured.
The policy should not be surrendered within 2 years.
Overall deduction under 80C cannot exceed Rs. 1.5 lakhs.

Who can avail of single premium term insurance plans?

Single premium term insurance plans are available to individuals aged between 18 and 65 years.

What types of deaths are covered under a single premium term insurance plan?

Single premium term insurance typically covers natural death, accidental death, and death due to Illness. It may also provide additional coverage for specific causes like critical illnesses or disabilities, depending on the policy's terms and any riders added.

How can one cancel the single premium term insurance policy?

To cancel a single premium term insurance policy, you typically need to contact the insurance company directly, usually through their customer service. Follow their specific cancellation procedure, including filling out a cancellation form or submitting a written request.

Is it possible to first choose a single premium payment and then opt for regular premium pay?

No, it's not possible to switch from a single premium payment to a regular premium payment after the policy is initiated. The payment mode is determined at the time of policy purchase.

Is the single premium payment option only applicable to term plans?

No, the single premium payment option applies not only to term plans; it can also be available for whole life, universal life, and other life insurance policies.

What is the difference between Single Pay, Regular Pay and Limited Pay?

For Single Pay, you make a single lump sum premium payment at the start of the policy period for your term plan. Conversely, Limited Pay allows you to pay premiums for a fixed and limited number of years shorter than the policy term. Besides, in Regular Pay, the premium payment term matches your chosen policy term.

Does a single premium term insurance plan have cash value if it is surrendered?

No, a single premium term insurance plan does not have a cash value if surrendered. Term insurance is purely a risk coverage product and does not build any cash value.

Can I skip health insurance if I buy single premium term insurance?

No, you shouldn't skip health insurance. A term insurance plan only gives money after death. Health insurance helps you when you're sick or injured. Think of it this way: health insurance is for you, term insurance is for your family.