Single Premium Life Insurance: All Premium Payments Paid at Once


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When it comes to buying life insurance, you’ve got many options.

As such, figuring out which policy type is the best can be tricky.

How much insurance do you need? How should you space out the premium payments? Who will ultimately benefit from the money?

Questions such as these are common inquiries — and for a good reason. Investing in a life insurance policy is one of the most critical steps you can take to safeguard your financial future. So, it’s important to choose wisely.

Today, we’re taking a look at one option you might not be as familiar with: single premium life insurance.

We’ll walk you through the ins and outs of this policy type, so you can determine if it’s a good fit for you and your family.

Ready to learn more? Let’s get started!

Single Premium Life Insurance 101: An Overview

So just what is single premium life insurance?

In a nutshell, it’s a policy in which you pay for coverage all at once. Rather than paying a set monthly premium amount, you’ll pay for a majority of the coverage at the onset.

As such, this type of insurance is often referred to as “paid-up life insurance” or “single pay life insurance.”

Paying a larger amount at the beginning helps you secure your death benefit upfront. The death benefit is the money that will be paid out to your beneficiaries upon your passing.

Ultimately, the amount of your death benefit will depend on how much is paid up at the beginning. Your age and overall health will also be factored into the equation.

While that’s a high-level overview, the reality is that there are several kinds of single premium life insurance.

Depending on your circumstance and current financial standing, you might consider one or more of these choices as you research your life insurance options. Let’s take a look at the breakdown:

Single Premium Whole Life Insurance

One subset of single premium life insurance is a single premium whole life insurance policy.

Under this policy type, you’ll still pay a lump sum when you sign up. In fact, all types of single premium life insurance will require this initial payment.

Yet, what sets the single premium whole option apart is that you’ll be locked into a fixed interest rate on your monetary return.

This means that throughout the life of your policy, your interest rate will remain the same, regardless of how the market fluctuates.

As such, this type of policy is generally considered the less risky option, as you’ll never have to worry about pricing volatility, and you’ll always know what to expect when it comes to your premiums.

Yet, if you’d like a more hands-on approach to your single premium life insurance, and don’t mind the challenge of balancing your portfolio (and the rewards you can reap by doing so), you may want to consider the next option:

Single Premium Variable Life Insurance

Like single premium whole life insurance, this policy type requires a lump sum payment at the beginning.

Yet, it differs in the fact that you’ll handle the policy much like you would any other investment portfolio.

You can opt to invest the money from your policy in different fund types, such as stocks and bonds and money market accounts, in addition to a fixed account. In this sense, a majority of your money will be subject to the ebb and flow of market conditions.

Thus, this policy type can lead to return rates that fluctuate, making it riskier than a whole life policy.

Yet, this risk makes it an ideal option for persons who are younger and relatively healthy, who are willing to ride the market wave for the chance to reap a larger reward in the end.

Options for Living Benefits

Though the ultimate goal of a life insurance policy is to provide a benefit for your dependents upon your death, there may be occasions in which you’ll need to access the funds in old age.

It’s important to review the terms of your policy to understand what’s allowed in terms of living benefits.

Some policies will allow you to access the funds tax-free to help cover long-term care expenses, such as rehabilitative treatments. Then, when you die, your beneficiaries will receive the remainder of the death benefit, income-tax-free.

In a similar vein, some policies also allow you to access your death benefit prematurely if you’re diagnosed with a terminal illness that grants you one year or less to live.

Due to this flexibility, single premium life insurance is an increasingly popular choice, as it allows clients to securely invest in their long-term health without having to delve into their other assets to cover such care.

What happens, though, if you need to withdrawal from the policy for other reasons, such as to supplement your retirement, or to cover other emergencies? Let’s review the general process for such access:

Withdrawing from Your Policy

The most direct way to withdraw funds from your single premium life insurance policy is through a loan.

By taking out a loan, you’ll have access to the cash value of your investment. Though specific plans may vary, you can generally take out up to 90% of the policy’s cash surrender value.

In short, your policy’s cash surrender value is the amount of money you’re entitled to when seeking access to it before your passing, or before it’s fully matured.

Taking out such a loan will lower your death benefit and will also negatively affect the policy’s cash surrender value. Yet, over time, you can repay these funds to build them back up.

If you simply want to withdrawal and don’t want to pay back a loan, many companies will also allow you this option. They will set in place perimeters that will determine how much you can take out annually.

Keep in mind, though, that if you go over your company’s cap, you may be subject to a surrender charge. This is usually calculated as a percentage of your policy’s paid premium or a percentage of the policy’s gains.

You could also accrue a penalty from the IRS if you access your funds too early.

Most single premium life insurance policies are considered modified endowment contracts (MEC). As such, they carry with them specific tax implications.

For example, if you withdraw gains before age 59.5, you’ll be subject to a 10% tax from the IRS. Be sure to review your policy’s terms and conditions before making the move to take out funds.

Your Life Insurance Resource: Finding the Info You Need

Are you interested in learning more about the different types of life insurance? Do you need help narrowing down your options to the best life insurance companies out there?

If so, we’d love to help.

We offer comprehensive life insurance research and helpful advice. Our goal is to empower you to learn all about the industry — and your options — before you make a decision.

Contact us to learn more and start securing your future today!

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Jeffrey Manola

Jeffrey Manola

Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance.

Not only does he strive to provide you with the best rates for your life insurance coverage, but he also wants you to be well informed about the different types of life insurance options that are available. You will also find a significant amount of valuable information on the multiple life insurance companies that can provide you with coverage.

Jeffrey Manola is licensed to provide expert advice and help aid in the purchasing process of life insurance products. He is licensed with the National Insurance Producer Registry (NIPR) in the following states:

AL: 790866 AR: 14358927 AZ: 14358927 CA: 0K29801 CO: 531038 CT: 002536246 DC: 3000281706 DE: 3000190912 FL: W383615 GA: 3089339 HI: 482421 IA: 14358927 ID: 646048 IL: 14358927 IN: 3100885 KS: 14358927 KY: DOI-986908 LA: 758187 MA: 2045330 MD: 3000011601 ME: PRN252004 MI: 14358927 MN: 40427014 MO: 8428106 MS: 10519253 NC: 14358927 ND: 14358927 NE: 14358927 NH: 2434852 NJ: 1562332 NM: 14358927 NV: 3299018 NY: LB-1484031 OH: 1117369 OK: 100293583 OR: 14358927 PA: 740709 RI: 3000183893 SC: 14358927 TN: 2383399 TX: 1969337 UT: 648983 VA: 987464 VT: 3426230 WA: 947010 WI: 14358927 WV: 14358927

Never hesitate to reach out to Jeffrey if you need help. Top Quote Life Insurance is more than just an online quoting agency. We want to help you save money, protect your future, and earn your trust (888) 777-7574.

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Life Insurance Rates?

Purchasing Life Insurance has never been easier

Or give us a call...888-777-7574