AZMoney - Compare Financial Products

Single premium life insurance

Single premium life insurance requires one big initial payment and guarantees a tax-free lump sum that will be paid in case of the death of the insured person. The main advantage of this type of insurance is that the payment starts earning money instantly and therefore the policyholder is able to earn more money on his investment. Like with any other life policy, insurance premium depends on the age, health, and location of the insured person as well as the amount of the death benefit chosen.

Single premium life insurance requires one big initial payment and guarantees a tax-free lump sum that will be paid in case of the death of the insured person. The main advantage of this type of insurance is that the payment starts earning money instantly and therefore the policyholder is able to earn more money on his investment. Like with any other life policy, insurance premium depends on the age, health, and location of the insured person as well as the amount of the death benefit chosen.

Up to 100 % of dividends and 10% of initial premiums can be cashed in after some time. This period is stated in the contract and usually is not shorter than 2 years. For people younger than 59.5 years all withdrawals will be subject to income tax and additional surrender fee can be required by the insurance company for early withdrawal. However, some plans allow people to withdraw part of their benefits if they are diagnosed with terminal illness or need money to pay for nursing home confinement.

The size of the death benefit depends on the initial premiums and the age of insured. The younger is the person when he signs life insurance contract the more time are left for the premiums to grow before the death benefit is paid out. For example, a 50-year-old female can pay a premium worth  £25,000 and get a guaranteed death benefit of £ 100,000 whereas a 60-year-old female will have to pay £50,000 in order to be guaranteed a £100,000 death benefit.

There are two most commonly used types of single premium life insurance: whole life and variable life. Whole life insurance contract offers stable return on the income that is invested by the insurance company. Variable life insurance option allows people to select from the menu of different market portfolios that can include stocks, bonds and other money market instruments. This alternative is more risky but it also allows people to take advantage of the potential gains if the financial markets are doing well. For people who are using variable life insurance policy a minimum death benefit is set but if the gains from investing exceed certain threshold, death benefit is altered.