Is Your Single Premium Life Insurance Policy Eligible For Tax Benefits?

There are times when you have some idle money lying out and you want to invest it at a better place. A single premium policy lets you do just that. When compared to regular premium policies or traditional premium policies, it has an upper hand as it gives you the leverage to benefit from its onetime payment approach and you don’t have to worry about period due dates and payment reminders.


In other words, a life insurance doesn’t always mean that you would have to keep paying the premium amount every six months or every year. Single premium life insurance provides you with the same benefits of protection and savings like the regular premium ones with a term of usually ten years; however, you can also exit the policy after five years as per your requirement.

Once you’ve chosen a single premium policy and have made the premium payment, you get the policy with its specific death benefit. With the help of different aggregator websites like policybazaar, you can easily track and find out the best SPLI policy for you.

The best time to buy a SPLI:

There are several scenarios that can make the path for your SPLI investment such as the money got from an inheritance, a hefty tax refund, a cash gift or a sudden cash gain in the case of business owners. If you are not sure about the share market status and safety of your money, or have still got some money left even after buying essential covers, SPLI is your safe-to-go option.

No more worrying about lapses or due date reminders:

You know that you have already paid the premium amount upfront, so you don’t have to keep a reminder of the dreadful due dates. Furthermore, it also secures your policy from getting lapsed as you already have made the full payment in advance.

How SPLI helps saving taxes:

The Single Premium Life Insurance Policy also helps you save money on your taxes. You can avail a tax exemption of upto Rs. 1.5 lakhs under section 80C with SPLI and even the sum assured in the policy is also tax free. In case, something goes wrong, your nominee is going to get the complete money without any tax deduction. However, it’s important to know that you can avail the benefit of tax saving investments exemption only once, as you have made the investment for a single time with this policy.

Get the benefits while you are alive:

There is no denying the fact that a life insurance policy helps your family to survive when you are no more; however, there might also be scenarios where you would have to take care of certain unexpected expenses while you’re alive, e.g. various illnesses that keep on cropping up in the old age. Investing in long-term care insurance can turn to be quite an expensive affair and more than not often we keep on putting off this important investment because of the cost associated to it. SPLI comes to your rescue in these kinds of scenarios.

There are some companies that let you avail the tax-free access to the death benefit that will help you pay the overwhelming long-term care costs. This feature also helps you save your assets from any potential financial damage. The death benefit amount that would be left in your policy will pass to your beneficiaries, absolutely tax free. And in case you don’t use any of these features, your loved ones are going to get the complete amount that you had originally planned. This is the reason that, SPLI is said to be the best form of investment as it not only takes care of your long-term care needs but also leave a good amount of your unused death benefit to be passed to your family.

Types of Popular Single Premium Life Insurance Policy (SPLI):

Single premium whole life insurance policy: This policy is based on the investment experience of insurance company and current economic conditions of the market and pays a fixed rate of interest to the policyholder.

Single Premium Variable Life Insurance Policy: It gives you the leverage to select the best suitable plan for you, from a wide range of well-managed bond, stock and money market subaccounts, as well as a fixed account.

How & when to withdraw an SPLI?

Single Premium Life Insurance Policy allows you to get the necessary control over your investment and also helps you maintain the cash flow for different scenarios such as for retirement or emergencies. You can easily apply for a loan to manage the cash requirement for an SPLI. The loan amount will be as much as 90% of the policy’s value.

Paying a single premium on a policy helps you to create an asset for your future. And if you are applying for a loan to pay the premium, it can be handy for you as you can use this amount as collateral against your loan. Apart from this, the cash value used in the investment keeps on accumulating every year and you don’t have to keep on investing.

You also have a withdrawal option available with SPLI where you have a minimum amount that you can remove from the SPLI’s cash surrender value. However, there might be certain penalties associated with the cash withdrawal that you can get confirmed by the insurance agent.


Whenever you plan to buy a Single Premium Life Insurance Policy, you need to ensure that you have chosen the right amount for your life cover. It will help you in saving further taxes. However, you need to realize the important fact that income tax rules on SPLI always applicable on the date of maturity; hence, there are chances that it might increase your tax liability. With an SPLI policy, not only you get to avail the tax benefit, but it also provides you with protection and savings for your long-term goals.