How to Buy Single-Premium Life Insurance

Single-premium life insurance provides an income-tax-free death benefit to your beneficiary, charity, or favorite cause, and is easier to qualify for - medically speaking - than other types of life insurance.

Difficulty: Moderate

Instructions

Things You'll Need:

• Attorney Referral Services
• Life Insurance
• Safes
• File Cabinets

Before You Purchase

1. Develop and implement a comprehensive retirement and estate settlement plan for you and your spouse. Make sure your final expenses (funeral, administrative costs, etc.) are included.

2. Study strategies for passing your estate to your heirs with maximum tax benefits.

3. Thoroughly research the integrity of any charity or special cause you might be considering as beneficiary.

4. Conduct a search for a qualified, experienced insurance agent to assist you in choosing a company and applying for a policy.

Apply for the Policy

5. Determine the amount of money you wish to deposit as a single premium.

6. Consider the type of insurance that reflects your tolerance for risk: There are basically three types of insurance policies when categorized by this criteria: whole life (most guarantees - low-risk tolerance), universal life (some guarantees - moderate-risk tolerance), and variable universal life (least guarantees - high-risk tolerance].

7. Get a printed illustration from your agent showing how much life insurance your single premium will buy and how the contract works.

8. Have your agent talk with your tax advisor to make sure all tax issues are accommodated.

9. Fill out the application for insurance, providing detailed information about your doctor and any recent hospital visits.

10. Read carefully all disclosure and permission statements before signing.

11. Read your policy carefully when it arrives, and file it with other important legal documents. Return the policy immediately if you find any errors.

Tips & Warnings

• Consider applying to more than one insurance company to get the most face value for your single premium.
• With this type of policy, the insurance company's financial strength is especially important.
• Make a copy of at least the title pages of your policy and give it to your family attorney or other trusted individual so that at least one other person is aware of the contract.
• Choose a policy type that will accept additional premiums if you believe you might want to deposit additional money later to increase your benefit.
• Don't put the original policy in a bank safe deposit box as the box may not be immediately available to your survivors; rather, put a copy of the policy in a home safe, secure filing cabinet, or another place you deem safe, but where family members can easily access it after your death.
• Be aware that as sales commissions on this type of policy are low, so follow-up service from your agent will be minimal.