SCENARIO TWO – CREATING AN IMMEDIATE FINANCIAL LEGACY
Bill at 56 invested a lump sum of $229,475 in a single premium whole life insurance plan, which got him lifetime coverage (till age 120) of $500,000. This was a cash value policy, fully-funded and never to lapse. I could easily get him the same coverage for less if he did not want cash values. Now, if Bill died one minute after paying his single and final premium, or 63 years 364 days later, the plan would offer his beneficiary an income-tax-free death benefit of $500,000.
These plans can work great for children also.
A 10 years old male child can get $200,000 worth of single premium whole life insurance with cash values for only $19,126; and a single premium universal life insurance for only $12,209.50.
A 10 years old female child can get the same $200,000 coverage for $16,592 and 10,490.50 respectively.
Usually, a parent can buy only half the death benefit of a child compared to his or her own policy. But that is also a matter of context in which a large life insurance policy is purchased on a child, who, for example, if you know will go to college and will most probably borrow loans for education, a $200,000 policy does not sound high. If the unthinkable happens to the child during college, the income-tax-free life insurance proceeds will allow you to take care of loans and other financial burdens.
Not only that, since beneficiaries on a life insurance policy can be changed anytime, in future the spouse can be benefitted because of the presence of a life insurance plan that will continue covering the insured.
Please keep in mind that single premium whole life insurance plans come as participating and non-participating. I and my affiliated Financial and Insurance Advisors like to offer our clients with all kinds of options available out there.