| Answering Some Common Questions about Single Premium Life Insurance |
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| Written by Sean Johnson |
| Saturday, 16 April 2011 15:20 |
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What is single premium life insurance? This form of life insurance requires a single large upfront payment. That single lump payment funds the investment portion of this whole life policy. The value of the policy will increase as the value of the investments behind it increase. Some policies offer a fixed rate return while others offer other investment options. The fixed rate of return is usually lower than the final value of policies using the investment options. But, it offers a steady rate of return with a guaranteed minimum face value on the policy.
What is single premium life insurance? This form of life insurance requires a single large upfront payment. That single lump payment funds the investment portion of this whole life policy. The value of the policy will increase as the value of the investments behind it increase. Some policies offer a fixed rate return while others offer other investment options. The fixed rate of return is usually lower than the final value of policies using the investment options. But, it offers a steady rate of return with a guaranteed minimum face value on the policy. It is one of the rarest forms of life insurance issued in the insurance market. How common is this type of life insurance? Actually, it is very uncommon. Insurance professionals often do not offer it to potential insurance customers. This is mainly due to the fact that it requires a large upfront payment, However, it offers a steady investment that some may find appealing. Single premium life insurance is actually a good tax shelter. It provides a tax-deferred method of passing on an inheritance. There are no penalties related to the money when it pays upon the demise of the named insured.The only time taxes become an issue is if the policyholder makes a loan or partial withdrawal on the policy. Then the IRS penalties will become active. For those that want to provide a set lump sum to beneficiaries after death, this is an excellent option Even with the tax penalties associated with loans and withdrawals, there are ways to get money from this investment without penalties, some policies allow withdrawals to pay for long-term care insurance, Others offer withdrawals related to caring for the named insured if that person is diagnosed with a terminal illness expected to take life within one year. Single premium life is single premium whole life insurance. This option comes with a guaranteed return rate each year the policy remains active.The risk of the investment falls with the insurance company instead of the named insured's beneficiaries.The amount may be low each year, but it compounds and can become substantial over a number of years. The biggest benefit of this type of policy is that it provides a minimum amount of return on the amount invested. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Sean Johnson is a recognized financial advisor for life-insurance-buyer.com as a referral agency that connects consumers with insurance products half off the usual cost. click on link for your personalized Free Life Insurance Quote |