Single-Premium Life Insurance

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DEFINITION of 'Single-Premium Life Insurance'

An insurance plan in which a lump sum of cash is paid up front to guarantee payment to beneficiaries. Because single-premium policies are instantly fully funded, the money invested builds up rapidly, making for a potentially sizable benefit even in the event of the policyholder's sudden death. Following the Tax Reform Act of 1986, this type of insurance policy became a popular tax shelter.

BREAKING DOWN 'Single-Premium Life Insurance'

There are a couple of popular single-premium policies: 1) Single-premium whole life, which offers a fixed interest rate paid by the insurance company which taken on any potential risk rather than the policy holder; and 2) Single-premium variable life, which allows policy owners to select from a menu of professionally managed financial portfolios.

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RELATED FAQS
  1. Do beneficiaries pay taxes on life insurance?

  2. How can I borrow money from my life insurance policy?

  3. What is the difference between the death benefit and cash value of an insurance policy?

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  4. If an individual becomes a policyholder of a variable life insurance policy and ...

    The correct answer is b. Insurance companies issuing variable life policies must allow the holders of those policies to exchange ... Read Answer >>
  5. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  6. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
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