Like most of things in life, perfection is also relative. A life insurance plan that perfectly fits your neighbor’s needs may not fit you at all. Keeping that in mind, let‘s just always remember that Single Premium Life Insurance plans are not for everyone.
1. Whether you choose a single premium whole life or single premium universal life, these policies require a single large lump sum premium. Not everyone will find it feasible. However, for those who can afford to dump in the cash, the benefit of never having to pay another insurance premium is very attractive. Your policy is fully paid and there, can never lapse. Pay once for the peace of mind of a lifetime.
2. Single Premium Life insurance gets you the most coverage compared to other ways of paying a premium.
For example, a 64-year-old healthy female at preferred risk can get a $419,282 worth of guaranteed lifetime coverage for a lump sum of $150,000.
If however, she pays 9 payments 0f $16,667 for nine years into the same policy, her face amount of coverage will only be $218,293!
3. Especially under estate planning situations, it is important to carefully structure SPLI plans. Whether you take a SPWL or SPUL is a matter of need and choice. That’s when you get the biggest bang for your buck.
4. SPLI plans will mostly come with low interest rates but these are guaranteed and tax-deferred. Also, keep in mind that the death benefit from these policies incurs no federal income tax and avoids any delays on probate. This can be a great plus for anyone, especially, larger estates.
5. Single premium life insurance is classified as a modified endowment contract (MEC).
This subjects SPWL plans to 10% IRS penalty if you withdraw or borrow from gains before age 59 ½. And yes, some single premium life insurance plans can be custom-designed to be non-MEC.
Also, remember that MEC only becomes an issue if your permanent life insurance plan has or going to carry substantial cash values.
6. Loans and withdrawals can affect your cash values and death benefit.
These plans best serve those who dump in the money and forget about it for a long time; or sometimes for the rest of their lives. Remember, this is excess cash that you want to leave behind for your beneficiaries and you can live well without it.
7. There are variable single premium life insurance plans also available in the insurance market. We, however, do not offer those. The main benefit of these is that you will have a choice of variable investment accounts. But the disadvantage is that your principal is also at risk.
The plans we offer are guaranteed single-pay or limited-pay life insurance options that do not carry the market risk.