Single Premium Life

A single premium life insurance policy is paid for in one lump sum. Most of this payment goes to the policy's cash value which allows you to begin with a larger balance upon which to earn interest.

This type of policy is often used by people seeking tax-deferred growth, and a tax-free death benefit for their family or charitable organization, and who will not need to access cash values.

If you have the funds available to pay for a policy all at once, you may want to consider this type of policy. However, it is important to understand the tax consequences with this type of policy. If you take loans against the policy's cash values, you will be subject to regular income tax on any gains. Further, if you are under age 59 1/2 -- and not disabled--you will be subject to a 10% IRS penalty in addition to regular income taxes.

If you are certain that you won't need access to the cash values of your policy, a single-premium policy may suit your needs.