Single premium whole life insurance can be a wise investment if you have at least $5,000 you don't need, want a generous death benefit, and need an investment that's safe and profitable. It can be used to pay a non-taxable sum to beneficiaries immediately upon your death. It can also insure a child in your name while you retain the ownership and cash value of the policy.
A one-time payment yields a fully-paid death benefit that's valid for as long as the policy remains intact. The death benefit is substantially higher than the cost of the policy. At age 60, it can be double the initial investment. At age 50, it can be four times higher. The younger the insured, the higher the benefit amount will be. The policy grows as long as it stays in effect, yielding dividends at a competitive, fixed rate based on current market conditions and the standing of the insurer. The earnings can be withdrawn as cash or applied to what's called "paid up additions." These are additional single premium whole life insurance policies, just like the original, that also pay dividends. Single premium whole life policies come with the option to use up to 90% of the cash surrender value as collateral against a loan. The collateral amount reduces the death benefit and won't earn interest as long as the loan remains unpaid. When the loan is paid off, the death benefit is restored and the policy again pays dividends.
Up to 100% of the dividends earned or up to 10% of the premium paid can generally be withdrawn against the policy's cash value. These instruments are considered modified endowment contracts. A 10% IRS penalty, in addition to income tax, applies to all gains withdrawn or borrowed by those younger than 59.5. As long as the dividends remain untouched, all earnings are tax-deferred. Some plans allow nontaxable access to death benefits for long-term care. Other plans let you withdraw part of the benefits without penalty if you're diagnosed with a terminal illness. You can cash in the policy whenever you wish, but a surrender fee may apply. Terms and conditions of single payment whole life insurance policies vary widely. It pays to do your homework before making a decision - LifeInsuranceRates.com provides free, quick, and easy access to insurance quotes online. You'll get unbiased information without the hype, and no personal information is required. Use the form above to see if a single-premium whole life policy is right for you.