Whole Life Insurance One Time Payment

Whole Life Insurance

Whole life is one of four major types of life insurance. The other three life insurances include:

• Term Life
• Endowment
• Universal Life

In the case of endowment and whole life insurance policies, the beneficiary receives a death benefit if the insured is injured and dies. However if the policy matures before the insured dies, the money goes to the policy holder.

A whole life policy covers the person insured for their entire life, up to 100-years-old. For those interested in purchasing a whole life policy, two basic types of policies are available: continuous premium whole life and whole life insurance one time payment.

Whole Life Insurance generally offers:

• Fixed premiums
• Guaranteed death benefits
• Tax-deferred cash value

Insurance Contracts

Insurance contracts basically involve three parties.

• Policy Holder
• Person Insured
• Beneficiary or Beneficiaries

Policy holders actually own the policy and are responsible for deciding who the beneficiaries are. They also choose settlement options, have the right to borrow the cash value and they are responsible for paying the premium. The person insured is the one whose life the policy covers, while the beneficiary or beneficiaries are the people who receive income when the insured person dies from causes covered under the policy.

If you want to be sure to have life insurance for your entire lifetime, a whole life policy makes a wise choice.

Whole Life Insurance One Time Payment

A whole life insurance single payment policy is a plan in which one relatively large premium is due when the policy is issued. In other words, the policy is paid for in full in a one-time payment and the policy holder has protection for their entire life. No other premiums will be required. Because a one time payment is paid at issuance, the policy has an immediate cash value and offers a lifetime of protection without yearly premiums. However, since this is an investment-oriented type of insurance, the one time premium payment can be substantial.

Installment Plans

For people who want to buy a single payment whole life insurance plan, but can't afford the one-time payment, some insurance companies offer installment plans. Such plans allow policy holders to make payments in installments while enjoying the advantages of one time payment life insurance. This feature allows people to buy policies with a higher value while avoiding the need to pay the entire premium at one time.

Borrowing Against Your Policy

A single payment whole life policy builds a tax-deferred cash value. As the insured person, you can borrow against this cash value for any reason, but loans against the policy reduce the death benefit amount.

Taxes and Distributions

If you are considering purchasing one of these whole life policies, you may want to check with your accountant first, because in some cases buying one of these policies causes tax problems as the policy builds tax-deferred cash value.

Under Internal Revenue Code, life insurance premiums must fall within specific limits. If they fail to meet this code, the policy becomes a modified endowment contract. If this happens, gain on distributions will be taxable. In addition, these distributions could be subject to a 10 percent penalty levied by the IRS if money is received before the age of 59 ½.

Distributions include:

• Surrender of policy values
• Dividends received in cash or accumulated as interest
• Policy loans

As you consider purchasing a single payment whole life insurance policy, it's a good idea to consult with a tax or financial advisor.