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Single Premium Whole Life Insurance

A traditional whole life insurance policy typically involves paying a premium in exchange for coverage until you die. As you pay the premium over the years, you accumulate cash you can access to cover financial emergencies or other needs. A variation of the traditional whole life policy is a product known as single-premium whole life.

How Single Premium Whole Life Policies Work

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. 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.

Benefits

A major advantage of single-premium whole life over traditional whole life is the speed with which cash accumulates. Because you're starting out with a large lump sum of cash, interest compounds faster and your cash accumulation should be greater over time.compared with a traditional whole life policy. Another benefit is the peace of mind gained from not having to worry about the policy lapsing due to missing a premium payment and that you never need to make another premium payment.