Is there any provision for a lump sum payment, instead of paying for insurance in installments? Indeed, it’s possible and such policies are known as single premium life insurance.
Though we never give it much thought, it is a fact that life comes with a plethora of risks, which we need to deal with every day. When you have dependents whose well-being is totally your responsibility, risks are even more. One way of hedging against this risk, is to go for insurance. There are many insurance products which can reduce your financial risk and secure your future.
There are several aspects of life which one needs to think about, when engaging in financial planning for the future. You need health insurance and an investment in annuities, which can guarantee that you have adequate protection against health risks and a steady stream of income during your retirement.
However, these plans do not take into consideration the one inevitable risk, which is that of death. My apologies, if all this sounds morbid, but one needs to think about the financial future of dependents in the event of one’s death. After all, life goes on even after a death and you need to think about your spouse and your progeny’s financial future, in the event of your death.
The Distinguishing Feature
Any insurance policy provides you with a certain amount of protection against risk, in return of your monetary investment. A single premium life insurance can be better understood if we break the whole term down into parts. Single premium means that you buy this kind of policy through a single lump sum payment, as against a payment through installments.
When you buy such a policy, it primarily provides you with death benefit, with a certain amount of money paid to your listed beneficiaries, in the event of your death. The death benefit amount is obviously greater than the principal amount which you invest and most of the time, even twice the initial investment.
There are two prime types of such a policy, which include ‘Whole Life Insurance’ and ‘Variable Life Insurance’. The former offers a fixed interest rate on your investment, while the latter offers a variable one, whose returns are entirely dependent on securities which the insurance company invests in. The rates offered are entirely dependent on the insurance company you buy it from and may be adjusted according to your age and life expectancy.
The biggest advantage of opting for such a policy is the guaranteed death benefit that it offers, which may even be more than twice the amount you invest. Besides that, your investment grows tax free, and the death benefit received by the beneficiaries is tax free too. You may draw a loan (worth about 90% of the policy amount), by using it as collateral. The dependents of a 60 year old woman who buys a USD 30,000 insurance policy of this type, will receive a death benefit of more than USD 60,000. These benefits are age dependent and a function of the total size of initial investment.
It is one of the best insurance instruments which lets a person provide for his or her dependents after death and ensures a financially secure future for them. The tax benefits that it provides you with and the option of drawing loans against it, make it a financial asset to bank upon. I don’t see any reason why a person wouldn’t want to opt for life insurance as it’s an asset which helps you in life and after death.