A Unique Approach to Life Insurance

Nate Crosby |

It’s September and you know what that means – it’s still national life insurance awareness month! In our quest to educate you on all things life insurance, I wanted to share some background on an interesting product that many clients are asking about – single premium indexed universal life insurance.  

If you recall from our previous article on life insurance, there are two main types to consider – term and permanent – where the primary difference is time horizon. It’s also – in my opinion – important to position insurance as a way to transfer risk. When implemented properly it is a powerful financial tool that ensures wealth accumulation can happen. We are quick to insure our home, car, and possessions but oftentimes we fail to insure the one thing that makes it possible – us! 

Single premium indexed universal life insurance

Clients often ask if there are conservative investments available to grow money without stock market volatility. For healthy investors under the age of 79 this one is hard to beat. This product is part of the permanent portfolio of life insurance options and is unique in that it’s fully funded up-front. Meaning you put a lump sum in at the beginning of the policy and begin receiving the death benefit immediately. The size of the death benefit will depend on the amount of money initially invested and the age and health of the insured. 

The policy has a few unique benefits 

  • Access to all your money in the first year without penalty
  • Interest crediting of at least 2.5% annually with the potential to earn as high as 8.9%
  • Tax deferred growth for as long as you want with no required minimum distribution
  • The contract comes with a tax-free death benefit to your beneficiary

There are living benefits to this type of life insurance as well. Not only does the policy grow over time but it can also be borrowed against for something like long-term care payments. Because of the way single premium indexed universal life insurance is funded upfront, you will see faster growth and ultimately an increase of your cash value. 

Who is the target audience for single premium indexed universal life policies  

Those who love this product tend to be clients who have excess cash in the bank earning little to no interest, grandparents who want to help grandchildren with future opportunities, business owners or just someone who wants to grow money tax-advantaged and with minimal risk. And if you’re married and are concerned one of you won’t qualify due to health concerns, you may want to consider a policy for just one of you – that way you still get the investment benefits. 

There are only a few companies that offer penalty free access to 100% of your money in year one and since the policy is guaranteed by the financial strength of the company writing it, financial stability is an important part of the due diligence process. Make sure you do your homework or find an insurance professional to help you out. 

If this sounds like something that could benefit your accumulation plan, contact us to learn more.