Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

Full Bio →

Written by Jeffrey Manola
Founder & Licensed Agent Jeffrey Manola

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

Full Bio →

Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 29, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right life insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

When it comes to buying life insurance, you’ve got many options.

As such, figuring out which policy type is the best can be tricky.

How much insurance do you need? How should you space out the premium payments? Who will ultimately benefit from the money?

Questions such as these are common inquiries — and for a good reason. Investing in a life insurance policy is one of the most critical steps you can take to safeguard your financial future. So, it’s important to choose wisely.

Today, we’re taking a look at one option you might not be as familiar with: single premium life insurance.

We’ll walk you through the ins and outs of this policy type, so you can determine if it’s a good fit for you and your family.

Ready to learn more? Let’s get started!

Looking to compare life insurance prices? We can help. Enter your ZIP code to get free quotes from multiple insurers.

Single Premium Life Insurance 101: An Overview

So just what is single premium life insurance?

In a nutshell, it’s a policy in which you pay for coverage all at once. Rather than paying a set monthly premium amount, you’ll pay for a majority of the coverage at the onset.

As such, this type of insurance is often referred to as “paid-up life insurance” or “single pay life insurance.”

Paying a larger amount at the beginning helps you secure your death benefit upfront. The death benefit is the money that will be paid out to your beneficiaries upon your passing.

Ultimately, the amount of your death benefit will depend on how much is paid up at the beginning. Your age and overall health will also be factored into the equation.

While that’s a high-level overview, the reality is that there are several kinds of single premium life insurance.

Depending on your circumstance and current financial standing, you might consider one or more of these choices as you research your life insurance options. Let’s take a look at the breakdown:

Your one-stop online guide for life insurance quotes. Get free quotes now!

secured lock Secured with SHA-256 Encryption

Single Premium Whole Life Insurance

One subset of single premium life insurance is a single premium whole life insurance policy.

Under this policy type, you’ll still pay a lump sum when you sign up. In fact, all types of single premium life insurance will require this initial payment.

Yet, what sets the single premium whole option apart is that you’ll be locked into a fixed interest rate on your monetary return.

This means that throughout the life of your policy, your interest rate will remain the same, regardless of how the market fluctuates.

As such, this type of policy is generally considered the less risky option, as you’ll never have to worry about pricing volatility, and you’ll always know what to expect when it comes to your premiums.

Yet, if you’d like a more hands-on approach to your single premium life insurance, and don’t mind the challenge of balancing your portfolio (and the rewards you can reap by doing so), you may want to consider the next option:

Single Premium Variable Life Insurance

Like single premium whole life insurance, this policy type requires a lump sum payment at the beginning.

Yet, it differs in the fact that you’ll handle the policy much like you would any other investment portfolio.

You can opt to invest the money from your policy in different fund types, such as stocks and bonds and money market accounts, in addition to a fixed account. In this sense, a majority of your money will be subject to the ebb and flow of market conditions.

Thus, this policy type can lead to return rates that fluctuate, making it riskier than a whole life policy.

Yet, this risk makes it an ideal option for persons who are younger and relatively healthy, who are willing to ride the market wave for the chance to reap a larger reward in the end.

Options for Living Benefits

Though the ultimate goal of a life insurance policy is to provide a benefit for your dependents upon your death, there may be occasions in which you’ll need to access the funds in old age.

It’s important to review the terms of your policy to understand what’s allowed in terms of living benefits.

Some policies will allow you to access the funds tax-free to help cover long-term care expenses, such as rehabilitative treatments. Then, when you die, your beneficiaries will receive the remainder of the death benefit, income-tax-free.

In a similar vein, some policies also allow you to access your death benefit prematurely if you’re diagnosed with a terminal illness that grants you one year or less to live.

Due to this flexibility, single premium life insurance is an increasingly popular choice, as it allows clients to securely invest in their long-term health without having to delve into their other assets to cover such care.

What happens, though, if you need to withdrawal from the policy for other reasons, such as to supplement your retirement, or to cover other emergencies? Let’s review the general process for such access:

Your one-stop online guide for life insurance quotes. Get free quotes now!

secured lock Secured with SHA-256 Encryption

Withdrawing from Your Policy

The most direct way to withdraw funds from your single premium life insurance policy is through a loan.

By taking out a loan, you’ll have access to the cash value of your investment. Though specific plans may vary, you can generally take out up to 90% of the policy’s cash surrender value.

In short, your policy’s cash surrender value is the amount of money you’re entitled to when seeking access to it before your passing, or before it’s fully matured.

Taking out such a loan will lower your death benefit and will also negatively affect the policy’s cash surrender value. Yet, over time, you can repay these funds to build them back up.

If you simply want to withdrawal and don’t want to pay back a loan, many companies will also allow you this option. They will set in place perimeters that will determine how much you can take out annually.

Keep in mind, though, that if you go over your company’s cap, you may be subject to a surrender charge. This is usually calculated as a percentage of your policy’s paid premium or a percentage of the policy’s gains.

You could also accrue a penalty from the IRS if you access your funds too early.

Most single premium life insurance policies are considered modified endowment contracts (MEC). As such, they carry with them specific tax implications.

For example, if you withdraw gains before age 59.5, you’ll be subject to a 10% tax from the IRS. Be sure to review your policy’s terms and conditions before making the move to take out funds.

Your Life Insurance Resource: Finding the Info You Need

Are you interested in learning more about the different types of life insurance? Do you need help narrowing down your options to the best life insurance companies out there?

If so, we’d love to help.

We offer comprehensive life insurance research and helpful advice. Our goal is to empower you to learn all about the industry — and your options — before you make a decision.

Contact us to learn more and start securing your future today!

Ready to Compare Life Insurance Rates?

It’s free, fast and super simple.

Looking to compare life insurance prices? We can help. Enter your ZIP code to get free quotes from multiple insurers.