When you’re looking to prepare for the future, whether it’s your child’s education or your own retirement, buying insurance can be an important tool in creating the future you want. One of the most common kinds of insurance is whole life insurance, which provides permanent protection for your loved ones and yourself as you age, but it also offers other benefits that can make your life much easier today. In this post, we’ll explain the 10 benefits of single premium whole life insurance so you can decide if it might be right for you.
When purchased with a spouse, a life insurance policy can allow a surviving partner to maintain their lifestyle and carry on business as usual after an untimely death. If a member of your family has passed away and you are left to take care of bills and other expenses, you may find that money from a life insurance policy is there when you need it most. There are several different types of life insurance policies available for purchase so it’s important to do your research before making any final decisions. It’s also good to know that some policies include options such as decreasing or increasing premiums based on your health so be sure to learn more about what is offered with each type before settling on one.
Single premium whole life allows you to make premium payments at any time during your life. This gives you flexibility in planning for future financial goals such as college tuition, retirement or simply having more disposable income each month. You don’t have to worry about losing your insurance coverage due to non-payment of premiums. A great way to be flexible and protect yourself and your family.
The benefit that really stands out with single premium whole life insurance is, of course, that it grows tax free. This makes it ideal for someone who doesn’t expect to be in a high income tax bracket when they retire, or for someone who doesn’t have a family. Tax deferred growth gives you time to let your investment compound and maximize returns without having to pay taxes on it each year along the way. You can also potentially leave more money to your beneficiaries without having to pay estate taxes.
Though it’s not always advertised, you can take out a loan against your life insurance policy. You can use a policy loan to buy real estate, to start or expand a business or even to pay off high-interest credit card debt. It’s important to pay back your policy loan, otherwise your death benefit will be reduced—or even erased completely—due to outstanding loans and unpaid premiums. A lender also has priority over any named beneficiaries in case of death; if you fail to repay your life insurance policy loan, an outstanding balance can be passed on to relatives or friends who may have been expecting more from their inheritance than they end up getting.
When you get a single premium whole life insurance policy, you pay a set amount (the single premium) at a fixed rate for a set period of time (the term). So when you make your monthly payments over that term, what happens to that money? Well, in most cases it goes into an account called a cash value. This can be done through any number of investment vehicles—stocks, bonds, mutual funds—and there’s usually some level of ownership involved. As time goes on and your premiums are adding up in that cash value, you earn interest or dividends on those premiums as well as on whatever you invested them in.
Guaranteed Universal Life
While it sounds like a niche product, Single Premium Whole Life Insurance is actually a form of universal life insurance. You’re required to make premium payments for your entire life (or until you reach certain milestones). This can be beneficial if you don’t want to have to pay for life insurance in lump sums and would prefer instead to spread out your premium payments over many years. As long as you continue paying premiums and keep up with minimum loan requirements (which usually consist of two years’ worth of regular, monthly premiums), your policy will remain in force indefinitely. The best part about SPWL policies is that there are no cash values and no surrender charges when you need to pull out early—the money still belongs to you.
No Medical Exam Needed
One of the biggest advantages to Single Premium Whole Life is that it doesn’t require a medical exam. In most cases, you can get coverage without ever visiting a doctor—and without paying anything out-of-pocket. At first glance, that may seem like it would hurt your chances at getting approved—but it actually helps in many ways. You don’t have to take time off work to visit an MD, and you won’t be forced to answer invasive questions about your health (some insurers ask applicants detailed questions about their weight or even when they last visited a gynecologist). Additionally, there are no long waiting periods before your coverage kicks in; with Single Premium policies, you can start collecting benefits almost immediately after signing up for coverage.
Single premium whole life insurance is also called permanent insurance because it is designed to provide coverage that lasts your entire lifetime. In some cases, you might have a level term life policy, meaning it covers you for a fixed period. If so, you’ll want to plan ahead so your loved ones are not left without financial security in case something happens to you before that period ends. Single premium whole life policies don’t expire, which means your family will be protected for as long as they need to be. Unlike other permanent coverages such as universal life and variable annuities, these policies do not require you to make cash payments or take an annual physical exam; instead, there’s just one payment at purchase and no more.
A variety of carriers are available
If you’re in good health, it’s not difficult to find a carrier who will insure you. SINGLE PREMIUM WHOLE LIFE INSURANCE carriers are usually self-insured, meaning they are managing their own financial risk rather than contracting with an insurance company. A carrier may have their own mortality and expense tables that factor into underwriting decisions. The tables help them make money if claims exceed expectations and to earn a profit if claims come in below expectations. When shopping for life insurance, it’s important to understand how prices are determined so you can understand which type of policy best fits your needs.
With whole life insurance, you pay premiums for a guaranteed period of time; with traditional policies, you can choose how long. With a single premium policy (sometimes called accelerated whole life), there is only one premium to be paid during your lifetime. This is helpful if you want to keep annual costs low and ensure that your family has a substantial death benefit by taking out a policy when you’re young and healthy. Also, because there are no recurring premiums with whole life insurance, it provides permanent protection at an affordable cost—meaning that once your loved ones receive their death benefit, they will continue to receive it in perpetuity. That’s something no other investment vehicle can provide.
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