Single Premium Life Insurance - Is It For You?
Single Premium Life Insurance - Is It For You
?Single premium life insurance is a unique financial product that allows you to pay for whole life insurance in one lump sum. For example, you can buy a policy worth $200,000 for only $60,000. In addition to the death benefit, the cash benefit of a plan gets bigger faster when you invest a large sum of money into the policy upfront. This means that your beneficiaries will receive a larger amount of money when you pass away and you only had to invest a third of the amount required. However, there are disadvantages to single premium life insurance and you must carefully evaluate if this form of insurance is right for you.
The biggest area of concern is the fact that you must invest a large amount of money upfront. The minimum amount that must be invested into a single premium policy life insurance policy is $5,000 and you cannot add additional money to the plan at a later date. You must invest all you are going to invest right at that moment. This is easy if you already have that kind of money lying around and want to shift it from a low interest account to something with a better return. However, if you don't have that kind of money in the bank then you are better off with the traditional payment option for life insurance.
Although the money put into a single premium life policy is tax deferred, you can be penalized for withdrawing any of it before the minimum age of 59.5. Plus, the insurance carrier may levy a fee against you if it seems you are trying to cash in the policy. They may make an exception if you are taking out money if you have been diagnosed with a terminal illness. However, you do have access to the funds if you need them in a pinch. You can also borrow against the money in your life insurance policy as well as cash it out completely.
In the end, single premium life insurance should be looked at as an investment instrument that offers somewhat guaranteed returns. It is a place to put money for the benefit of your heir and other people you want to take care of after you have departed this world. Before you make an investment of funds, it is best to get a second opinion from a qualified insurance agent or financial planner who can help you evaluate your specific lifestyle to see if this is a good investment strategy for you.
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