Single Premium Universal Life
A single premium Universal Life Insurance policy provides all of the advantages of regular Universal Life Insurance with just a single lump-sum amount paid at policy inception, creating an immediate guaranteed death benefit amount without having to make any future payments. The death benefit depends on the amount of the single premium payment at policy inception, along with the age, gender, and health condition of the insured, with younger, healthier individuals having a smaller initial single premium payment and a larger death benefit.
The single premium Universal Life Insurance policy include all the benefits of a typical Universal Life Insurance policy, such as being an asset, providing a cash account that can grow in value past the minimum death benefit, investment options that can more quickly grow the death benefit, and tax advantages that other financial products cannot provide. The single premium option assists individuals in growing returns quickly because the plan is fully funded and assures a guaranteed benefit in the future for a single lump-sum payment at present. In addition, such single premium insurance can ensure that dependents will be cared for properly and protect the estate of the deceased from liabilities placed against it, such as medical bills and long-term care costs.
A single premium option is attractive to those individuals with available cash and the desire to find a low-risk way to protect and guarantee a healthy inheritance for their dependents. Because the policy is permanent insurance, it is an asset with value that can continue to grow, and when fully funded, can serve as an income source if desired, or be surrendered and sold for cash, depending on the specific terms of the issuing company. The insured also has the option of taking a low-interest loan against the cash value if needed, and many policies provide guaranteed minimum cash value that equals the single premium so as to ensure the initial investment is protected.
Single premium plans can also be rigid, with the potential for tax penalties, owed income taxes, and policy surrender charges for early withdrawal based on applicable tax rules.