Single Premium Life Insurance
In the mid 20th century, many people looked at whole life insurance as a long term investment as well as a way to provide financial protection for their families. Cheap term life insurance rates made it an attractive alternative and the investment value of whole life insurance was overlooked. Not surprisingly, recent financial upsets have investors returning to the low risk, stable returns of single premium life insurance.
Purchasing Paid Up Life Insurance
Unlike traditional whole life insurance, term life insurance, or universal life insurance, single premium life insurance is paid in one lump sum with no monthly premiums. The amount of the death benefit depends on the age of the insured at the time the policy is issued and the amount of the investment. If a policyholder chooses not to withdraw dividends paid on the policy, they are reinvested in additional paid up policies with the same terms as the original policy.
A Low Risk, Low Maintenance, Tax Deferred Investment
Since life insurance companies are highly regulated by the government, there is very little risk associated with whole life insurance investments. The insurance company automatically invests uncollected dividends in additional paid up life insurance policies so that as an investment, single premium life insurance requires very little action by the investor. Income tax on life insurance dividends is deferred until the money is withdrawn from the policy.
Using Accrued Cash Value As Collateral For Loans
In most cases, policyholders can use up to 90% of the accrued cash value of their policy as collateral for a business or personal loan. During the term of the loan, the policy does not pay dividends and the death benefit is reduced by the outstanding amount of the loan. The life insurance portion of the policy remains in effect and the policy resumes payment of dividends as soon as the loan is repaid. Investors have the flexibility to use funds as needed.
Taxes and Penalties
In addition to income tax, the IRS may assess a 10% penalty on dividends withdrawn by the investor before he or she reaches the age of 59 ½. This penalty applies to all types of retirement accounts. The penalty does not apply to loans against a single premium whole life insurance policy since no dividends are withdrawn. It also does not apply if the funds are moved to a different retirement investment account. Death benefit payments are non taxable.
Life Insurance Quotes
As a long term investment, single premium whole life insurance policies offer a number of advantages, especially for people with limited investment experience. In addition to being an investment vehicle, these policies offer financial security for the policyholder’s dependents.
TheLifeInsuranceQuote.com offers free, instant life insurance quotes online to help investors compare and buy the best, affordable life insurance. Find the cheapest rates on the right policy for your needs before making such an important purchase.
Start a life insurance quote now and find the best, yet affordable single premium life insurance by comparing rates, coverage, and insurance companies all at once.
