Single Premium Whole Life Insurance (SPLI) Explained
Most of the time, when we purchase life insurance, we agree to make monthly, quarterly, or yearly payments. There are some whole life policies which can be paid off, usually over a period of 7 years or more. But another way of purchasing coverage has begun to get more attention slowly. This simply involves making one large payment in the beginning. The single premium is set to fund the coverage for the rest of an insured person's life.
One obvious advantage might be the guarantee that life insurance is taken care of without having to worry about paying any more bills. One obvious disadvantage, as you may have already guessed, is the fact that this first premium must be pretty large.
Who Considers SPLI?
The type of person who may consider this unusual way of paying for a life insurance policy would have a lump sum of cash that they are sure they will not need to spend for the next few years. They will also want to leave money to their estate, and they want to turn the cash they have into a larger life insurance death benefit. This way they can be assured they will be able to leave money to their kids, grand kids, or a favorite charity ..
Advantages of Single Premium Life
- Set it and Forget it – You can make on premium payment, and be assured you have funded a lifetime policy.
- Estate Building – Most of the time, the cash will buy a death benefit of several times the original premium amount. For example, let us say that that a healthy 65 year old could turn $ 12,000 into a $ 100,000 death benefit to leave behind. That was just an example. Premiums will vary.
- Cash Value – Since the one large lump sum fund coverage, the actual cash value of the policy should grow very quickly. The policy may have enough cash value to be borrowed against or cashed in at some future point. The cash value may grow by a set interest rate, or it may grow my some market index, like the S & P 500. This will be specified in the particular policy you buy.
- Policy Provisions – Policies may have an accelerated death benefit, or provisions for early surrender or using some of the face value while the insured person is still alive in special cases. These cases could include terminal illness or nursing home confinement. These functions can give you a policy which performances "double duty."
Disadvantages of SPLI
This product is not for everyone. Look at some of the disadvantages to consider.
- You Need The Money – You must have the lump sum payment. Of course, the premium will vary by the age and health of the insured person, the insurer, and the amount of coverage you buy. The premium is usually several thousand dollars. This must be money that is not needed for the next few years, or