Single Premium Life Insurance

Single Premium Life (SPL) Insurance Explanation

What is Single Premium Life Insurance, which is also sometimes just called SPLI? Instead of making payments over a period of years, you actually fund this type of policy with one large sum at the beginning for the contract. We are used to paying premiums once a month, or once a year, over many years. In this case, you just pay once, and then you are done. You can also get more information here: Single Premium Life Insurance Explained.

Who Should Consider SPLI?

There are some advantages to buying a whole life policy this way. You can just make one large payment, and then know you will be covered for the rest of your life. And if you happen to have a lump sum of cash, you can usually purchase many times that amount of face value. So one type of person who should consider this product would have some cash they do not need to spend, and who would like to turn that sum into a larger sum to pass on to heirs.

Estate Transfer Example

Consider the example of a retired person who received $20,000 as a lump sum paymet from an investment account. Since this individual also has a pension, other savings, and social security, they are sure they will not need to spend this money in the near future. Let us say for this example, that individual could purchase a $100,000 single premium life policy. So they could take the $20k, and they could be assured that if they can leave it alone, they will be able to pass on a much bigger estate to their spouse or children.

Single Premium Life vs Annuties

This may seem similar to some annuities that allow the owners to leave the cash value to beneficiaries. But there are some differences. With an annuity, the money will grow at the rate the contract allows. This could be a fixed interest rate or some market index. But there is no way that annuity will grow to many times the lump sum right away. With SPLI, the death benefit should be quite a bit larger than the premium payment right away.

Single Premium Life Disadvantages

Policies differ, and you must compare them to find the one that is best for you. But here are some typical things to consider before purchasing one.

• Fees or Surrender Charges – Just after your purchase your policy, your cash value will be less than your investment. These are good for people who are sure they can leave the money alone for awhile.
• MEC Status – The IRS considers SPLI as Modified Endowment Contracts, and you may not get all of the tax benefits you do from a normal life policy.
• You need a fairly large amount of money – It may be more affordable for many people to purchase normal life insurance and just make monthly, quarterly, or yearly payments.
• Underwriting – Even though many insurance companies accept older people who are not in perfect health, they will probably require some sort of health application.

Advantages of SPLI

Here are some of the main reasons why many peope are turning to single premium life.

• Cash Value – It should grow fairly quickly since you have funded the policy with a lump sum. This cash value can be borrowed against, though that may reduce the death benefit. You can also surrender your policy for the cash if you need it. Again, this really only works out well if you have held the policy for a few years. Check the terms of any policies you are considering.
• Accelerated Death Benefit – Look at the terms of your specific contract, but you should have a provision for cashing in a large percentage of the death benefit if the insured person is terminally ill.
• Large Death Benefit – You have the opportunity to multiple the cash you have in order to pass it on to your heirs as an estate.. This could be your spouse, children, grandchildren, or a favorite charity.
• Simplified Underwriting – This is still life insurance, and their could be underwriting. But because the policy is being funded by a large, upfront payment, many insurers will accept applicants up to age 80.

How Much Does Single Premium Life Insurance Cost?

Like any other policy, your cost will depend upon more than one thing. Your age and health, the size of the policy you want, and other factors will matter.  You can get free life insurace quotes or find a qualified local agent here: Senior Life Insurance Quotes.  

Don’t worry – in life insurance terms, senior usually means over 50!

More Information:

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