There are several options for Single Premium Life, but no matter what carrier or type of Single Premium plan used, they all have one thing in common: A onetime payment or lump sum premium that will pay up a death benefit, which guarantees that the policy will remain in force until maturity. Single Premium Life is a great way for clients looking for solutions for permanent life with one payment, allows guarantees, lifetime protection and financial growth. This type of plan is perfect for estate planning; it can help with the taxable gain of passing money to heirs. Reallocating of CD’s, money market accounts, older Life insurance plans, or using cash from checking and savings.
Types of Single Pay Life:
Whole life non-participating: Is an interest sensitive whole life plan. Guaranteed coverage with minimal cash values, the cash values are based on current interest credits. The cash value grows tax-deferred. The advantages of this type of SPWL is the fixed cost and low out of pocket premiums. Simpler underwriting is normal for this type of plan.
Participating Whole Life: The cash value and death benefit become increasing as Dividends (earnings from the carrier) are paid out yearly to each policyholder, which allows the purchase of additional paid up insurance. Dividends are not set on a guaranteed basis. These types of policies are usually fully underwritten, but will depend on the insured. Clients will obtain an increase in estate value, tax-deferred accumulations of cash value. Access to cash values at time of need using policy loans. Taking out cash value will lower the total cash value and death benefit available.
Universal Life: Using a Guaranteed Universal Life plan as a single premium can be a great opportunity if the client is not looking for cash value, but wants a higher death benefit. The cost is usually cheaper for the larger Death Benefit. The death benefit can be guaranteed for life of the client, and is very flexible on how to build the policy. The underwriting of this type of plan will usually be fully underwritten.
Most carriers today offer a living benefit rider: Access to their death benefit before death as an acceleration to use for at home health care or nursing home care.
The benefits of a Single Premium Life policy include:
- Immediate death benefit paid tax-free to beneficiaries for effective transfer of wealth.
- Money can now come from Qualified and Non-Qualified Monies.
- The life applications can usually have quick underwriting decisions; some carriers allow approval the same day as the application.
Why Agents Offer Single Premium Life Insurance
There are many compelling reasons to offer Single Premium Life Insurance, such as:
- You can help families with some of the most difficult decisions of their life.
- You can provide your clients with peace of mind, as they will know they have a health plan behind them
- You can offer a profitable product that will help your bottom line
How to Get Started with Single Premium Life Insurance
If you decide to offer Single Premium Life Insurance, we recommend talking to someone from the Premier team of experts. They will provide answers to your questions, and have tools available to support your new product offering.
Under current tax laws, a single premium life policy is considered a Modified Endowment Contract (MEC). Borrowing funds or withdrawing dividends from your policy results in a taxable distribution, that is the earnings or gain becomes taxable first as income.
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