Have you ever heard of Single Premium Whole Life? This type of plan is permanent insurance, and the coverage lasts your entire life. One of the best aspects of this plan is that you only have to make one payment!
The Single Premium Whole Life (SPWL) policy discussed in this article has a minimum face amount, or death benefit, of $25,000. It is a participating plan, which means that it earns dividends.
As a concept, think of dividends like interest earned. Dividends are determined annually by Western when we analyze all income and expenses. Each year we may pay an appropriate dividend to eligible policies.*
The SPWL accumulates cash value more quickly than our other Whole Life plans, and the principal can be recovered in five to six years.
For example: Charles is 60 years old and has $25,000. He wants to plan ahead to leave the money to his children. If he puts the money in an annuity, it could create a taxable situation for them. But Charles wisely uses the money to purchase a SPWL with a face amount, or death benefit, of $51,951.** Now his beneficiaries will receive almost double the amount he paid up front, as long as he doesn’t have any outstanding loans on the policy. They won’t even have to pay taxes on the death benefit. With possible dividends, the amount could grow even more.
If you are looking for ideas, many people are faced with old interest sensitive universal life policies that are not performing as expected due to the low interest rate environment we have been experiencing over the last several years. Now would be a good time to review your coverage needs and potentially use accumulated values to purchase a paid up single premium policy. Call your Western agent for advice to see if this is the best decision for you.
Single Premium Whole Life policies are a smart idea to purchase for children as well. A one-time payment when they’re young locks in coverage for their whole lifetime, eliminating worry about who will make payments once they become adults.
With one payment, your life insurance would be taken care of for the rest of your life. Think: one and done!
*Dividends are not guaranteed.
**Subject to underwriting and if Charles (60, non-smoker) qualifies for the non-tobacco rating.
Unless funded entirely by proceeds of a 1035 exchange, this policy will be considered a Modified Endowment Contract. This means distributions, which include cash withdrawals, policy loans, and assignments, may be subject to Federal Income Tax. An additional 10% penalty tax may also apply prior to the policyholder’s age 59½. Please consult your tax advisor with questions.
ACS, FLMI, Member Programs Assistant
Call 877-935-2467 to speak with a Western Fraternal Life Representative.