SPL Policies cover Life Insurance, Long Term Care, and Wealth Transfer Needs.

Single Premium Life (SPL) provides benefits that most other life insurance policies can’t. The concept of one and done certainly applies here. Instead of lifetime payments (every month or annually), one larger payment is made, and the policy is paid up. Younger consumers will save a significant amount of money over their lifetime with an SPL policy if they can afford the one time upfront premium.

A 40-year-old male client of ours in excellent health recently inquired about a permanent $1,000,000 life insurance policy. He wanted either an SPL policy or a traditional Universal Life Policy. His life expectancy per 2016 expectations is 77 years old. If he makes continuous payments until his projected life expectancy into a Universal Life Policy, he would have 37 years of premium payments. The annual premium for $1,000,000 would be $5,400 per year or $199,800 over the life of the policy. If the insured decided to purchase an SPL, he would make one payment of $136,184, which would be a savings of $63,616 over the life of the policy.

The amount of insurance that will be issued into an SPL policy is based on age, health, and the amount of your one time upfront payment.

Single Premium Long Term Care Insurance Benefits

In the event that you need ongoing medical treatment, a Single Premium + LTC Hybrid policy is a great option to have. SPL policies with a long term care rider can be used to pay for nursing home or home health care costs. These long term care riders are activated if the insured has been medically diagnosed with a cognitive disease such as Alzheimer’s, Dementia, or Parkinson’s, or if you are unable to perform two of the six activities of daily living. As members of the American Association of Long Term Care Insurance, we can walk you through this often complicated topic.

An SPL policy is often used as a wealth transfer tool. Many people want to pass an inheritance on to their children and grandchildren. Funds are placed aside with the sole intent of passing directly to heirs upon death. The funds sit in a risk-free, low-interest bearing account for years, sometimes decades. For example, a 60-year-old woman has two grandchildren, and she wants to leave them $50,000 each. She places the money in her savings account with her local bank. She passes away five years later at age 65, and her grandchildren each receive their $50,000 gift from their grandmother upon her death.

If you have money that is 100% set aside as a future gift to your heirs, there is A BETTER WAY. Let’s take the same example above. If the same 60-year-old woman is in adequately good health, she can leave a much larger gift to her grandchildren. Instead of leaving the funds with the bank, she purchases a Single Premium Life Policy and designates her two grandchildren as equal beneficiaries. The $100,000 she has with her bank earning little to no interest purchases her a paid-up $165,000 life insurance policy from day one. Upon her death five years later, her two grandchildren each receive $82,500, an extra $32,500 each.

The minimum deposit required to apply for an SPL policy is $5,000, and unfortunately, that will not purchase the greatest coverage. A good policy will usually require a deposit in the $15000-$25,000 range. We have clients that routinely deposit $50,000, $75,000, and amounts far in excess of $100,000 in order to maximize the inheritance to their loved ones.

SPL policies are used to increase an inheritance to loved ones, as well as charitable donations.

Disadvantages of a Single Premium Life Insurance Policy

A Single Premium Life Policy is a great choice for someone who wants a risk free way to increase an inheritance, but there are a few things to consider prior to applying for coverage.

You must be medically approved for this plan, even though you have the funds the approval is not guaranteed. If you are in poor health, you probably will not be eligible. Please allow the team at TopLine to evaluate your eligibility, do not do it yourself. People often assume they are not eligible due to medical problems, and that may not be the case. Depending on your age, you may have to undergo a medical examination to be approved for this policy. In the event you want to open a second or third policy, you will have to undergo an additional medical examination. The medical examination is done at your home or office and takes 15 minutes.

Single premium life insurance policies are often considered a MEC, which stands for modified endowment contract. Most people do not withdraw funds from an SPL policy while they are alive, but they are eligible for cash withdraws if necessary. If money is withdrawn from an SPL policy it will normally create a taxable event. If you are under the age of 59 1/2 you may be subject to a 10% penalty as well. TopLine agents will explain the details, but also recommend that talk to a tax advisor prior to purchasing an SPL policy.