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Single Premium Whole Life
If you would prefer to have life insurance without having to continue making premium payments, single premium whole life insurance might make sense for you. These plans offer you full protection in exchange for a single premium payment. They also have a cash value component that grows and can be borrowed against over time.
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What Is Single Premium Whole Life Insurance
This form of life insurance is paid upfront with a single lump-sum payment. This is unlike other life insurance plans, which require monthly premium payments to keep the plan active. The size of the death benefit offered by these plans varies based on the amount of money initially invested and the age and health status of the insured. A 25 year old in good health could invest $50,000 and be offered a death benefit of $250,000. Someone who is 60 years old with similar health would only be offered around $125,000. It all depends on the circumstances.
Other Types of Single Premium Life Insurance
There are several types of single premium life insurance. Single premium whole life insurance is one category. The other options are single premium universal life and single premium variable life insurance.
Single premium variable life insurance
Single premium variable life insurance is another form of single premium life insurance that has a cash value component that grows at a variable rate. The rate at which it grows depends on how you choose to invest. Though, your options for investment are limited to the options selected by your insurer. Normally, the plans function similarly to mutual funds. They can track:
- Money market funds
- An index
- An equity portfolio
Single premium universal life
These plans are similar to whole life insurance, but it provides you with coverage up to a certain age, rather than a certain period of years. This makes it a form of coverage that could be considered permanent because you can set it to span your entire lifetime. Similar to whole life plans, these plans have a minimum cash value growth rate. Though, the growth rate is normally lower than whole life insurance plans. In this type of plan, your cash value growth rate varies based on investment performance.
Modified Endowment Contracts
Single premium life insurance plans are considered modified endowment contracts, which cannot be reversed and are subject to a withdrawal penalty. If you want to take out or borrow from the cash value of the policy before you turn 59 and a half years old, you incur a 10% tax penalty and you must pay income taxes on the withdrawal.
Find Single Premium Life Insurance
Single premium life insurance allows you to guarantee income replacement for your loved ones when you pass away. With this coverage in place, you won’t have to worry about paying premiums for the rest of your life. You’ll also pay less for coverage in the long term. To start searching for an appropriate single premium life insurance plan, contact Insured For Life today.
