What Is Single Premium Whole Life Insurance?
Single premium whole life insurance is a type of permanent life insurance that includes a cash value component and covers you until your death. Instead of paying an ongoing monthly or annual premium as with other more common forms of life insurance, a single premium whole life insurance policy is designed to be funded by one single premium payment.
A single premium whole life insurance policy provides a guaranteed death benefit for a determined period of years or until you reach a certain age, depending on your policy.
The cash value component grows at a fixed rate generally set by the insurance company when you open the policy. Many insurers guarantee a certain minimum rate of return on your investment, which is usually lower than a traditional investment account, such as a 401(k) or IRA.
Cost of Single Premium Whole Life Insurance
A single premium whole life insurance policy can have single premiums between $5,000-$10,000 for a death benefit that pays out up to $100,000. Single premium whole life insurance costs more over the life of the plan compared to a traditional term policy with a monthly payment. That is because the one-time premium payment provided upfront funds your death benefit and cash value immediately.
Term life insurance with a monthly or annual premium rate is based on the policyholder’s age and health and the amount of the policy they want to purchase. The death benefit for a single premium life insurance policy is based on age, health and how much a policyholder can spend upfront. For example, a 30-year-old healthy policyholder might pay about $15,000 in a one-time premium for a $100,000 single premium life insurance policy compared to $15-$20 a month for a 20-year term policy that comes with a $100,000 death benefit.
Who Might Want to Consider a Single Premium Whole Life Insurance Policy?
A single premium whole life insurance policy might make sense for you if:
- You need guaranteed cash values and death benefits.
- You have a special needs child, since the benefit can be used to fund a special needs trust.
- You're involved in estate planning. For this situation, it's a good idea to work with a qualified estate planning attorney.
- You're replacing an existing life insurance policy.
Single Premium Whole Life Insurance Options
Single premium life insurance policies vary by benefit, plan type and investment options provided by insurers. Each single premium life insurance policy is different and has its own features, so shopping around and talking with a licensed agent can help you figure out the best plan to fit your needs.