Single Premium Life Policies
The primary benefit of life insurance is to leverage money to create an estate. This benefit can provide for survivors or to leave something to an organization or charity. Single premium life policies (sometimes called SPL) are a type of life insurance. In this type of policy you pay a lump sum of money into a new policy in return for an instant death benefit. This policy is guaranteed to remain paid-up until death. There are many different versions of single pay policies available. These policies offer a wide range of investment options as well as withdrawal provisions.
With single-premium life policies –
The cash you invest applies immediately. In Fact, this enables the policy full funding. The size of the death benefit depends on the amount invested, insurance company used, type of underwriting, age and health of the insured. With these policies, a younger person is normally has a longer life expectancy. This gives the funds you pay for the premium more time to grow before the insurer expects to pay out the death benefit. The larger the amount of money you initially contribute to your policy, the greater your death benefit will be. For example, a 65-year-old female might use a $25,000 single premium to provide a $55,000 income-tax free death benefit to her survivors/beneficiaries. Whereas a 50-year-old male’s $100,000 single premium might give a $400,000 death benefit.
Many companies have provisions in the policies which allow for a partial withdrawl of cash value in the event that you need money. Other policies guaranteed a full refund of cash value at a certain point (often 6 years ). A policy can always be surrendered for cash value but policies surrendered prior to maturing may have surrender charges. Single premium plans should not be used with money that you may need to spend or to live off of. If you have a lump sum of cash that you don’t need right now and you want guaranteed life insurance protection for your family or your favorite charity, single-premium life insurance can be an ideal solution.
However you choose to use a single-premium life insurance policy, remember to consider your personal financial situation. You also want to think about other retirement vehicles already in use. This way you can select and shape your policy to best match your needs.