A life insurance policy many people are not aware of, but has great leveraging power is single premium whole life insurance policy. Single premium whole life insurance is unique because it is not a monthly premium which is paid, but a lump sum paid by the insured under the policy.
This is a great solution for those who either have legacy needs or would just prefer to have their policy completely paid off quickly. This type of single premium whole life insurance is a very unique product which may not be right for everyone, but when designed for the correct consumer it can be an integral part of your financial plan.
Single premium whole life insurance has advantages over traditional types of life insurance policies. Since you are paying premiums up front you are giving the life insurance company the time value of money, meaning they can give you a higher return on your investment. The leveraging power of this type of investment is hard to beat in a very low risk environment. Because it is a policy which is only a smart decision for some people, it is important to understand the advantages and disadvantages of single premium whole life insurance.
On occasion we have clients who approach us and just want to complete pay off their life insurance premiums. They don’t like the idea of getting a bill, and they already have a lump sum of money on the side which they have earmarked for life insurance. In this case, we would recommend single premium whole life insurance as long as they have enough money to cover their living expenses and won’t have to keep tapping into the policy for money.
Single premium whole life insurance makes sense for those who have accumulated savings in which they want to pass on as an inheritance for family members. If you have a specified amount of money in which you know you are already going to pass on to family members, wouldn’t it make sense to increase this amount, and pass it on in a tax free way? We think so. Often times, a single premium whole life insurance policy will double the amount of money you put into it when you pass away. This is some powerful returns, with a very low level of risk. It is great for the lazy safe money you have sitting around.
The first step in determining how much you want to put into a single premium whole life insurance policy is to determine how much you pay into it, or how much you want beneficiaries to receive upon your passing. This will give you a good idea of what size policy you are looking for. The next crucial step in the process is to compare quotes. Since this is a long term solution it is best to compare rates across multiple carriers. This kind of policy does differ sometimes between companies so it is imperative you understand all of the policy details to be sure you understand how it will work upon purchasing the policy.
Be sure to understand how much your money increase to, access options to your cash value, and if the policy face value or cash value increases over time.
Be sure when comparing companies rates you are comparing apples to apples when it comes to policy features.
This is crucial when purchasing a single premium whole life insurance contract. Once you have settled on the appropriate policy, then it is time to apply. The application process is the same as traditional life insurance, with a medical examination. The application and underwriting process is based upon your age and health like other types of life insurance. As always, patience is key when applying for life insurance.
As I mentioned above, the best thing to do is compare rates for multiple carriers before locking yourself into one product. At Waterway Financial Group, we have access to over 50 carriers and we can do the shopping for you. We have the ability to run personalized reports for you based upon your situation and the financial goals you have. Please get in touch with us regarding how a single premium whole life insurance policy can fit into your financial plan.