Single Premium Life Insurance
The concept of Single Premium Life Insurance is quite simple. The insured pays a one time, lump sum payment ($10,000 or $25,000 or $50,000 or more) and receives a fully paid life insurance contract. There is a minimum death benefit.
The amount of this death benefit depends on the individual and the amount originally deposited. Ordinarily, the full premium goes into the accumulation or cash value account. An interest rate is applied to the cash value annually. It may fluctuate over time. However, it is always subject to a guaranteed minimum interest rate. Generally, the insurance company charges an annual fee to cover administrative expenses and mortality risks.
This policy is generally viewed as a long term policy. This is because the insurance company generally charges a hefty amount if you take your money out during the first few years. You may, however, take a loan out against the policy. And usually, the terms are very favorable to the insured. Usually, the insurance company structures these policies to meet federal tax law criteria so that the death benefit is free of income tax to the beneficiary