The main objective of a life insurance policy is to create a fund for the family of the deceased, so that those left behind can sustain themselves financially with the help of accrued funds. But this does not mean that you have to opt for a life insurance policy wherein you will have to make regular premium payments every month, quarter or year. For this purpose, a different kind of policy exists, which not only allows you to make a one-time premium payment but also removes the financial burden of making regular payments from your life.
Such policies are single premium policies and there are different versions available, along with a wide range of investment and withdrawal options. In almost all cases, the size of the death benefit depends on the amount invested, along with the age and health of the insured. So, if you invest a higher amount, you will obviously reap higher rewards. Read on for more.
Best Single Premium Policies for You
Two favorable single premium policies that suit the requirements of most investors are:
This policy will pay a fixed rate of interest based on the present economic scenario and the company’s jurisdiction.
Premium Variable Life
This policy will pay a variable rate of interest on the lump sum invested, depending on the market conditions and stocks. Only if you are well adept in reading market changes, should you go ahead with this type of single premium policy.
Advantages of Single Premium Policies
Most people use these types of policies to protect their wealth from the deadly force of taxes. The cash value of your insurance will be a bit lower than the amount of money invested in different stocks and bonds. You can opt for a low-interest policy loan which will allow you to borrow a loan against the cash value of the life insurance policy as well. This will not only grant you financial help in times of need but will also help you gain large-sized tax benefits. This loan is not counted as a financial gain, so you are safe.
Even if you get a large sum of money from winning something, you can invest that in a single premium life insurance policy. The act will help you avoid paying taxes on capital gains or gifts on that amount of money. Not only that, you will have the money for yourself for keeps, and for a long time. Similarly, if you require cash for emergency purposes, or for any other requirement, you can take a loan against the amount that you have paid for your one time premium. But then, the cash value will be a bit lower, as mentioned earlier. Even if you cannot enjoy the original benefits of the insurance policy after taking a loan, you will be able to regain them by paying back the same.
Who should Opt for such Single Premium Life Insurance Policies?
- It’s a good option for anyone who travels frequently and seldom stays at home; so that the policy covers you in case you are unable to make payments on-time (as in the case of a regular policy).
- Anyone who is not looking for tax benefits but wants serious financial protection.
So, depending on your finances, you can choose to invest in a single premium insurance policy and also save tax under single premium policy. If you do have a large amount of cash or have come across a large reward, then you should invest the same and you can nominate your children or grandchildren to reap the profits!