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Life Insurance Basics

What is single premium whole life insurance?

If you're shopping for life insurance, single premium whole life (SPWL) insurance is one option you might consider.

You may have questions about what SPWL insurance is, how it works and whether it's the right product to include in your financial plan.

This quick guide covers some of the most important things to know about SPWL insurance in order to help you decide if it's a good fit.

1. What is SPWL insurance?

The definition of SPWL insurance is fairly simple: It's permanent life insurance which covers you until you pass away. Your named beneficiaries would be eligible to receive a death benefit from the policy.

What makes SPWL insurance different is how its premiums are structured and paid; while some types of insurance, such as universal life insurance, require recurring premium payments, SPWL has just one upfront premium.

2. What are the benefits of SPWL insurance?

SPWL insurance coverage allows you to pass on death benefits to your heirs tax-free, which could make it a helpful tool for estate planning. Since this is a type of whole life insurance, your policy can build cash value. Since the policy has an upfront premium, the initial cash value is usually larger than found in policies with recurring premiums. If your policy includes an accelerated death benefit feature, you may be able to access the death benefit while you are alive to pay for long term care/chronic illness expenses or end-of-life expenses. Terms and qualifications may vary by insurance company and/or state.

3. How does the cash value work?

With SPWL insurance policies, your cash value is guaranteed with accumulation laid out in the contract. Any cash value increases are on a tax-deferred basis and, again, your heirs generally pay no tax on death benefits they receive. If you need to withdraw cash from the policy - either as a loan or partial surrender - there are tax implications to be aware of.

Because this type of policy is generally considered a modified endowment contract (MEC) by the IRS, withdrawals are subject to income tax on the earnings. An MEC means a life insurance policy has been funded with an amount of money that exceeds federal limits on policy funding. Keep in mind that you may also pay a 10 percent early withdrawal penalty when taking cash from your policy before age 59 1/2. Furthermore, your policy's death benefit will be reduced by withdrawals and/or unpaid loans.

4. Who is this kind of life insurance good for?

A SPWL insurance policy may be better suited to someone who has enough assets to cover the single premium payment and wants to create a tax-sheltered legacy for their heirs. An important note: It's likely there are medical underwriting guidelines you'll have to meet to qualify; it's essential to factor that into your decision-making when choosing any life insurance policy.

For more, read this article on life insurance basics.


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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

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