GUARANTEED FINANCIAL LEGACY
Single Premium Life Insurance Plans are designed as permanent policies that, based on selection, may or may not have cash values.
Since they cover the insured till the age of 100 and sometimes beyond,
there is an inherent guarantee that at one point in time the life insurance proceeds will surely reach the intended beneficiary.
SINGLE PREMIUM LIFE INSURANCE EXPLAINED
Single premium life insurance plan is a fully funded life insurance policy. A lump-sum of cash is paid into the policy to create a death benefit that under guaranteed assumptions remains level at all times and maintains an increasing cash value. The amount of coverage usually is directly proportional to the amount of initial contribution, your age, your health, and lifestyle.
EXAMPLE ONE – SINGLE PREMIUM WHOLE LIFE INSURANCE
Let’s look at an example. If a non-smoker male in perfect health at age 50 contributes $163,295 into a Single Premium non-participating Whole Life Insurance plan with cash values, his immediate coverage could be as much as $500,000. That is an instant gain of $330,000. If he dies the next day or any time till the age of 121, his beneficiary will receive a total of $500,000 generally income-tax-free, if structured properly. The policy also gains deferred cash values with time. If at the same time you decide to pay annually for this $500,000 whole life policy, you will end up paying $400,000 over a period of fifty years for the same amount of coverage. So, by paying a single premium for a $500,000 policy there is a substantial saving of $236,705!
A female can get the same coverage for a single premium of $146,685.
EXAMPLE TWO – SINGLE PREMIUM GUARANTEED UNIVERSAL LIFE INSURANCE
Now, if a male at age 50 doesn’t care for cash values and takes Guaranteed Universal Life (GUL) Insurance instead of a Whole Life, he will contribute only $118,911 for a $500,000 death benefit. He will pay less but will have the same amount of guaranteed coverage until the age of 121. That’s how simple it is! Women usually get more for less. It is mainly due to the mortality factor. A perfectly healthy female at age 50 can get a $500,000 single premium guaranteed universal life plan for only $101,605.
Simply speaking, the best single premium life insurance is the one that offers you the most coverage for a single payment and covers you for an entire lifetime. If it’s a cash value whole life plan, make sure it’s not a MEC.
TYPES OF SINGLE PREMIUM LIFE INSURANCE PLANS:
- Single Premium Whole Life – Participating and non-participating (SPWL)
- Single Premium Guaranteed Universal Life (GUL)
- Single Premium Universal Life with Index Option
- Single Premium Term Life Insurance
- Single Premium Variable Life (VUL)
These are both cash value plans. One is more aggressive than the other but both last a lifetime (age 121).
GUL policies do not accumulate cash as they go. As a result, single premium universal life plans cost less than whole life or cash value plans. The target is to have a lifetime of coverage and receive the most in death benefit the money can buy.
These plans allow risk-free participation in S&P 500 performance. So the dividends are index-based and not guaranteed.
This is a very special and limited option. A few of the insurance carriers accept advance single premium for a term life insurance plan. By doing so, the insured ends up with substantial premium savings. For example, if a 40-year old male in good health can get a 30-year term life insurance for an annual premium of $980. The cumulative premium of 30 years will be 29,400. If instead of paying annually, he chooses to pay a single advance premium of $19,784.70, he will end up saving $9,615.30. The quoting tool online does not offer this option. If you are interested, please give us a call.
Please keep in mind that very few life insurance companies offer dedicated single premium life insurance plans. To find the best single premium life insurance option, please allow your agent or advisor to do some digging for you. An experienced licensed professional can easily custom-design a suitable single premium life insurance.
TAX TREATMENT OF SINGLE PREMIUM LIFE INSURANCE PLANS
The single premium contribution that you put in this plan grows tax-deferred. You will only pay tax on the gain if you decide to withdraw or borrow from the policy. However, there could also be an IRS penalty as these policies are usually considered Modified Endowment Contract. Just so you know that a single premium whole life plan can be structured as non-MEC.
CONCLUSION
From covering the cost of a decent burial to protecting your estate from inheritance tax, single premium life insurance is an effective and powerful solution for creating an immediate estate through life insurance.
