What is Single Premium Life Insurance? And The Top Providers?

Thang Truong
Thang Truong
Updated on:

If you have a sum of money set aside, but want to use it to improve your family’s financial situation there are plenty of options. One way to “invest” that money and gain multiple benefits is through the purchase of a single premium life insurance policy.

What Is Single Premium Life Insurance?

Often term life insurance policies and permanent life insurance policies require regular monthly premium payments to maintain coverage. But, this isn’t the only option available for policyholders. There are other ways of paying premiums to maintain a policy. Life insurance premiums can be paid quarterly, semi-annually, yearly, or once up front with a single premium payment.

The option to pay a single large premium when buying your insurance policy can reduce stress as policyholders know their insurance is “paid up,” and shouldn’t lapse for non-payment. It’s also a simpler option that allows policyholders to avoid the hassle of remembering monthly payments.  

One of the biggest benefits of single premium insurance is faster growth of the cash-value of a life insurance policy thanks to putting a large amount of money into the account from the start. It even makes this type of insurance popular with people looking to grow their money on a tax-deferred basis and withdraw later tax free.

People interested in buying single premium life insurance usually choose guaranteed universal life insurance or indexed universal life insurance or variable universal life insurance. Despite being less popular, whole life insurance policy is sometimes selected as well.

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Drawbacks of Single Premium Life Insurance

This type of policy may not be accessible for the average person as it assumes the policyholder has a large sum of money to invest in life insurance. For instance, a typical single premium whole life insurance policy from State Farm for a 55-year-old man with a death benefit of $100,000 requires an upfront payment of $51,000+.

Additionally, the single premium payment option locks up a large portion of your money in a financial product with limited growth. There are options for faster growth with a variable universal life insurance policy, but you’ll be restricted by the investment products available through the insurance company. You may enjoy more investing freedom by choosing a money market account or a 401K retirement fund vs. a life insurance policy, although you have to pay income tax on your capital or investment gains.

What is Single Premium Whole Life Insurance?

Standard single premium policies are whole life insurance policies that cover you for life. The policyholder buys a set amount of insurance using a one-time premium payment that is intended to grow over time. Other than the single premium payment allowing the cash-value of the policy to increase faster than it would with monthly premiums, these policies are set up just like traditional whole life insurance coverage. 

The cash value of your premium grows at a fixed rate defined by the profits and investments of the insurance company. You can usually withdraw money from the cash-value portion of your whole life insurance as a loan although you have to pay interests, usually less than 8%. Policyholders don’t have to pay back the loan, but the amount of the loan, plus interests, will be deducted from the ultimate death benefit given to beneficiaries.

You may also choose to surrender the life insurance policy to the insurance company a few decades down the road. At that point, you’ll be given the cash-value of the policy minus a few fees, which should have grown considerably due to the large single payment.

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What is Single Premium Variable Universal Life Insurance?

Some insurance companies also offer single premium variable universal life insurance. It is exactly as it sounds, a variable universal life insurance policy with a single upfront premium payment to fund it. Variable universal life insurance policies allow policyholders to choose how their premiums are invested to potentially earn even greater returns.

Insurance companies offer a range of investment products that policyholders can invest their cash-values in. Some insurers offer as many as 50 different investment products. Since the policyholder makes the decisions regarding investments, there is no guaranteed growth rate for the cash-value.

>>MORE: The Differences Between Variable Life Insurance (VLI) and Variable Universal Life Insurance (VUL)

Best Single Premium Life Insurance Companies

Are you currently shopping for single premium life insurance? Consider starting your search with one of these three insurance companies:

State Farm – Best for Online Quotes

One of the few companies that offers online quotes for their permanent life insurance policies, State Farm will give you an estimate for all of the options when you provide a little personal information. We entered the data for a male, aged 55 years, living in Ohio seeking a $100,000 death benefit. In return, we received quotes for single premium insurance, term life insurance, whole life insurance, limited pay life insurance, and universal life insurance. The single premium whole life insurance policy required a payment of $51,614.

Protective – Best for Annuities

Established in 1907, Protective Insurance isn’t as well known as some other insurance companies. However, they offer a single premium variable life insurance policy that allows you to choose how your premium is invested. You can also opt to purchase a variable annuity with a single premium payment instead. Annuities are designed to pay out a fixed income in retirement and any cash-value remaining at death can be directed to your beneficiaries.

Assurity – Best for Mutual Insurance

If you prefer to buy your life insurance policy from a mutual insurance company, turn to Assurity. They don’t answer to shareholders, and the company is partially owned by the policyholders. Their whole life insurance policies are available with a single premium payment option. You may also be able to earn an annual dividend.

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Final Notes:

  • A single premium life insurance policy is a permanent life insurance policy with a single upfront payment.
  • These policies are designed to cover you for life without any additional payments.
  • A single premium variable universal life insurance policy allows you to choose how your cash-value is invested.
  • You can withdraw monies from the cash-value of your policy to live on.
  • There are many insurance companies offering single premium policies including State Farm, Protective, and Assurity.
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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