What is Single Premium Life Insurance?
What is Single-Premium Life Insurance? According to Investopedia, this type of insurance charges the policyholder a single up-front premium payment to fully fund the policy. Single-Premium Life (SPL) Insurance can be a good option for those who want to pay a lump sum and then forget about the policy. With a whole life insurance policy, the policyholder can still have cash value build, in fact, it would build rather quickly with a large upfront injection of cash into the policy.
Much like a traditional whole life policy, a single-premium policy can have riders – everything from Long Term Care to Accidental Death Riders. The only key difference in a single-premium policy versus a traditional whole life policy is the upfront cost of the single-premium. You pay your monthly, or yearly premiums on a traditional policy.
How is this policy beneficial?
In life, we can never be certain of our future. Because of that, there are many reasons why it could be beneficial to pay upfront. For instance, say you have an amazing job at the moment but the market seems volatile, and your job security might not be there. Insurance is still an important and very necessary expense. So paying upfront could be helpful in securing that coverage while keeping your monthly out of pocket expense low.
How much does a single premium policy cost?
Because of Single-Premium being upfront the bill can be quite expensive, the cost is based on age and medical condition. Let’s use a $50,000 death benefit as an example. For a whole life insurance policy on a 21-year-old, non-tobacco, healthy individual.
For a traditional whole life policy, an individual in that state of health could be $35/month.
As for a single-premium life policy, you could be looking at $7,234, for example. Which is fairly expensive and out of reach of many other people. But, if you happen to have the cash and the opportunity, it could be a good investment for you and may protect you from a wage decrease and losing your regular whole life insurance policy.
There is a pretty good argument to be made for how much you would save with that kind of policy as well. Paying $7,234 is equal to 206.7 months of paying $35/month, which covers you for a little over 17 years. Whereas after 17 years, you would still be paying $35/month.