What Is Single Premium Life Insurance
A single premium life insurance is policy purchased with one large lump sum in the beginning of the policy. This would be an ideal insurance policy if you have a large lump sum of cash, from a retirement account, a savings account, an inheritance, a payout on another insurance policy, or even lottery winnings. Often single premium life insurance will have a minimum requirement for the premium. This is usually $10,000. However, that $10,000 could buy you a $50,000 policy that would be payable immediately once you paid the premium.
Depending on the age of the policy holder at the time of purchase, a person could have a significant amount of money available upon death secured from the one premium. The amount of protection will increase over time until it becomes many times greater than the initial investment amount paid to purchase the policy. This plan only works well if you plan on using the funds as a death benefit and not withdraw money from the insurance policy.
Single premium policies also pay annual dividends. You may also borrow against the insurance policy but usually at a high interest rate. Because it requires such a large sum of money up front, single premium policies also are easier to qualify for. The insurance company isn’t assuming as much risk because you have already covered a large portion of the death benefit in you initial payment. The death benefit can also be willed to charities or organizations.
Transfer Of Wealth
Another secure tax-free option for purchasing single premium insurance is transferring some of your wealth into the policy. Not only will the policy amount continue to grow it is also available if you are in need of cash. The policy can also be converted into its full cash value at anytime over the life of the insurance policy.