Characteristics of Single Premium Life Insurance
Characteristics of Single Premium Life Insurance
When people think of life insurance, they typically do so in terms of the monthly payments they have to pay over the time frame relevant to the type of insurance they want to purchase. This is generally because most people do not have significant savings, especially the young, and must rely on their monthly income to finance such a large investment. But like many other large purchases, it is possible to buy insurance and only pay one lump sum for it. It is called Single Premium life coverage, and there are benefits and disadvantages to securing this type of life policy.
The process of purchasing single premium life insurance is the same as any other type of insurance. You must still select a plan and qualify. However, when it comes to paying for it, you would just make one upfront payment instead of smaller payments over a longer period of time. For example, a person may purchase a $100,000 life insurance policy and pay $30,000 up front. This guarantees the benefits of the policy for the entire time the policy is in effect. It also changes the way the cash benefit of the policy accumulates allowing policy holders to gain more money faster.
With a single premium life coverage? you are basically shifting assets from one place to another. Instead of letting money sit in a savings account earning 2% interest, you are investing it in a life insurance product that provides tax free benefits to your beneficiaries of a higher value. Additionally, many of these plans allow you to make a withdrawal of funds if you are diagnosed with a terminal illness. This allows you to get money for medical care and other costs without compromising the money you want to leave your family.
Since a single premium life insurance policy is basically whole life insurance, you can treat it in very similar ways. This means you can still withdraw money from the policy, borrow against it, and even surrender it for a fee. However, the minimum amount you can pay on a single premium policy is $5,000 and you cannot add additional funds at a later date. You must also pass the insurance company's qualification requirements which may include a medical exam. If you are looking for an investment vehicle that makes effective use of the cash you have on hand, then single premium life insurance is certainly something worth looking into.
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