single premium life insurance
Financial professionals often fail to consider and explain the benefits of single premium life insurance or a (SPL). similar to a (SPIA) or Single Premium Income Annuity these are different vehicles in retirement though often serving the purpose. Many people including agents who are unfamiliar with these policies are somewhat perplexed by the fact that SPLs are modified endowment contracts (MECs). Which means SPLs are taxed in a similar fashion to annuities. Individuals who have money or investments that they've placed on the sidelines just to pass down to their heirs, save for emergencies, or use for opportunities, should consider a single premium life policy.
In many cases, clients who purchase life insurance, fund their policies with money they don't intend to use for income planning vehicles. So what they basically do, is to over fund a life insurance policy with one payment. In this type of contract, (Single Premium Life) they are guaranteed a minimum level of growth throughout the product's life that can also eliminate much of the downside risk often associated with an equity investment along with the tax consequences of an estate after their passing. At this stage and many retirees lives, the risk tolerance level has really reduced so there is less of a need for cash.
Not unlike annuities, SPLs have great liquidity where they can take annual withdrawals penalty free. And with many, they also have a money back return of premium guarantee at any time. Many of these SPLs look, talk, and walk like a hybrid contract. This comes into importance when someone who had had the inability to do two of the activities of daily living was in a nursing home or required home health care, Now the entire death benefit can go tax free towards paying for those benefits while they are living and when they need the money.
For many clients who don't have traditional long term care plans, a single premium life policy will help towards funding their post retirement medical expenses. These contracts also have a first year bonus that is as good as or better than the annuities out there today.