The positive features of Single Premium Life Insurance is that you can grow tax deferred earnings while retaining access to your money. It had its strongest appeal in the annuity market, where it had the same type of tax deferral as annuities but with the ability to make tax-free loans. The benefits over annuities was the death proceeds from single-premium whole life insurance; passed free from any federal income taxes on the gain in value.

New ruling by the IRS

Then the IRS enacted Section 7702A of the Internal Revenue Code that created the concept of a MEC (modified endowment contract). Immediately after the change in the law to designate single-premium whole life insurance as a MEC, sales of Single Premium Whole Life slowed to a trickle. It was commonly held that single-premium whole life insurance had lost its tax status, therefore insurance agents went back to selling annuities and single-premium whole life was shelved.

Single-premium whole life insurance merely lost some of its tax advantage but still maintains its tax status. It is a superior product compared to annuities and continues to make a great deal of sense. The bottom line is that Single Premium Life Insurance enables you to preserve and transfer your wealth without passing along estate taxes.

If you are single, most likely, you are not thinking about the need for life insurance coverage. This is something you may want to consider even at a young age as you don’t want anyone to be burdened if something should happen to you. Keep in mind that life insurance will never be as cheap as it is at a young age. Here are some reasons why you need life insurance despite being single:

Three reasons why you need life insurance:

1. If you are in your mid-20s and already have a stable job. You may want to buy a house which creates a mortgage. If something happens to you and your family inherits your house, you don’t want to saddle them with this mortgage. This is a good reason to buy life insurance.

2. Your grandparents were denied life insurance due to medical reasons. Such family history could be hereditary; passed down for several generations including you.  If you intend to marry and establish your own family, it is wise to buy a life insurance with low premiums while you can still qualify.

3. If you are young, single and business-minded, there is a great possibility that you would venture into owning  your own business in the near future. When talking about sole proprietorship, partnership or corporation, life insurance is one thing you should have. If you buy life insurance coverage now, you won’t face any problems or delays when life insurance is really needed. The rate is always lower if the person is still young.

Regardless of whether you are on your 20′s, 30′s or 40′s and single, you don’t want to be caught without life insurance if the unexpected happens to you. Buy now while you are insurable.

Reader’s Question:

I’ve been reading a lot about life insurance because I want to make sure I’ll be choosing the best insurance policy for myself and my family. My uncle Ted told me that he has just purchased a single premium whole life insurance policy, is this a plan I should consider? I admit that life insurance is quite difficult to understand because it has too many terms that I’m not so familiar with.

Lily

Trenton, NJ

Sure Lily. One of the common myths about getting life insurance is that people think they are “too young” to purchase a policy.  I might caution you that a Single Premium Whole Life is mainly purchased by people over 65 who have a nest egg they want to protect and continue to earn money. This is a quality investment because not only are you building a cash value, you can tap into it or borrow from it in case of an emergency. These funds are protected against a financial disaster as well.

It is important that you buy life insurance

You never want to be caught without life insurance as there is always the chance of your demise. Also your reason for getting life insurance is because you are preparing for what might be the worst case scenario. The good thing about buying term life insurance while you’re young is that you get it at a lower price while providing security for the people you love.

A myth some people believe is that they do not need life insurance because their children are self-supporting and their mortgage is paid off. That might be a valid reason, but have you ever wondered how your husband will survive and manage his daily life without you? What if he outlives you for 10 years or even 20 years, what will happen to him?

Lastly, another myth people believe is that since they are getting life insurance from their work, they do not need to get additional life insurance coverage. The truth is that your life insurance coverage from your work may not protect you and your family completely. Review the insurance coverage that you have to see whether you are getting enough for you and your beneficiaries. Aside from that, if you leave your job or you retire, your life insurance coverage will most probably terminate, therefore buying another life insurance policy is still advisable.

Reader’s Question:

My friend is in the process of buying a life insurance policy. I’m also looking into buying a life insurance too but the problem is that I’m quite unfamiliar with all these insurance policy terms. Can you tell me what Single Premium and Universal Life Insurance are all about? How can I start into getting one?

Melanie

Frankfort, KY

Single Premium Life Insurance

Single Premium Life Insurance is a type of whole life that allows you to pay the entire premium up front. You have all of these funds working from the start to build up a nice cash value which will continue until the policy has been terminated. You will take comfort in knowing that your heirs will be cared for as well as having funds available for you to borrow against or cash in if you should have a financial problem.

With this type of policy the money that you invest will grow tax-deferred, meaning you only pay tax on the earnings if you withdraw or borrow money from the policy. Like any other insurance, the benefit that passes to your heirs will be tax free. A Single Premium Life Insurance Policy is a safe haven for money because it is creditor protected. Since your money is in an insurance policy, a financial disaster such as a bankruptcy or creditor’s claims will not be able to tap into your nest egg.

Universal Life Insurance

Universal life insurance is one type of permanent life insurance that offers low-cost protection and a savings element as well. The savings element, premiums, and even death benefits may be modified depending on what the policyholder wants. Also, universal life insurance makes it possible for policy holders to use the interest they have accumulated in savings to help them pay their premiums.

If you have decided to get universal life insurance, the first important thing that you need to look at is how much coverage your budget can afford. To know this, it’s vital that you get universal life insurance quotes. These insurance quotes will give you information about the policy including not only the rate but the conditions, benefits, and exclusions as well. Get several life insurance quotes from various insurance companies. From those quotes, create a table to compare your quotes. Then, choose the best possible deal that you can get.

A great feature of a Universal Life Insurance policy is that you have the luxury to add more coverage later if you want to. You can start with little coverage and as you can afford it you can add more at a later date that will suit not only your budget but also your needs.

To start looking for insurance quotes now you can run a search for “life insurance quotes” from the Internet. You can also click on an ad on this page or check with your local life insurance agent to help you find good insurance deals in your area.

Reader’s Question:

How much life insurance do I really need? I was advised that one of the factors that I need to consider when buying a life insurance policy is my age and health. Please give me more details on in which direction I should go.

Lea

Helena, MT

That’s correct Lea. When deciding about how much life insurance you need, your age is one of the vital factors that you need to consider. You failed to mention your age, however to answer your question let’s take these scenarios an as example. If you are 18 years old and you’re single you probably don’t think you need to purchase life insurance, however this is an age when the premiums are cheap. If you have family, a husband or children then you have another good reason for buying life insurance.

Buy 15 to 20 times your annual income

If you are in your 20′s and 30′s, you should consider buying life insurance coverage amounting to 15 to 20 times of your annual income. In most cases, young and single people do not buy a life insurance policy because they do not have liabilities. Again, for married couples with children, buying life insurance is vital. For those who are in their 50′s, the ideal life insurance policy is 8 to 10 times of their yearly income. I strongly recommend the best time to buy life insurance is before you feel that you need it. Age is a factor affecting life insurance rates, the more you age, the higher your life insurance rates will be. So, the rule of the thumb is that you buy a life insurance policy long before you need it.