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Are you planning for a secure retirement and eventual transfer of your estate? You do not have to be very wealthy to benefit from this. Let us look at one product that is becoming more noticed these days with advisors and people who are making future plans. This is called single premium whole life (SPLI).
The most obvious difference is that you make one large cash payment when your coverage begins. You are probably used to having a monthly bill! That one lump sum funds your coverage, and so you do not have any more payments to make.
So you see that you have given the insurer a certain amount of money. In return, they issue you a policy for a sum that is probably a few multiples of the original amount. Many people are using this product to fund their estate.
Look at the example of a healthy 70 year old who retired from the public school system. Her savings and teachers pension enable her to live well. But she also has another $50,000 she inherited from her own parents. She could take this cash and fund an SPLI for, let us say, $200,000. This way she sets up a nice estate to pass on to her kids and grand kids.
The paragraph above is only meant to illustrate how this works. The amount of cash you would have, and the death benefit you could buy, depend upon different things. As with any other life insurance, your premium and coverage amount will depend upon age, health, etc.
What types of people are happy with a product like SPLI? Well, it seems to work out very well for those with a few thousand dollars that they do not expect to need in the near future. And of course, it is an option for those who would like to take that money and turn it into more money for their estate.
Be sure you will not have to use the money for a few years. In the first few years, policies can impose fees and surrender charges. So it is probably not the right life insurance if you are not sure if you will need the money to live on.
One other single premium life insurance advantage is the fact that this large payment will allow your policy to grow value fast. Have you seen normal policies where it may take 5 – 10 years to have a cash value? Once your policy has a cash value, you can use it to borrow against. You can also cash it out. So in addition to having coverage, you also have set up an emergecy fund for future use.
Accelerated death benefits and nursing home confinement provisions are another feature. In some cases, the insured person can actually use part of the face value while they alive!
There could be some disadvantages to single premium life insurance. Remember that early cash outs can incur surrender fees. You lose some of the tax advantages of regular life policies too. And of course, you do need to have a lump sum of cash to fund it.
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Tags: elder care, estates, Finance, insurance, life insurance, retirement, seniors, single premium whole life, wealth, whole life insurance