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How Single Premium Whole Life Can Help Worried Clients

With a precarious job market, fewer pensions and declining wages, today’s young families are unlikely to enjoy the same standard of living as their parents did. As a result, many older Americans are helping their adult children with living expenses and are looking for ways to help ensure a better future for their grandchildren.

If you have clients in this situation, you can help them immediately increase their estate by suggesting they reallocate a portion of their assets toward a single premium whole life (SPWL) insurance policy.

Despite its obvious and unique advantages, SPWL is often misunderstood and rarely recommended. However, when matched with the right client, it can provide tremendous leverage that could take years to achieve through other methods. And by transferring a portion of their savings to SPWL, clients can grow cash value, pass an inheritance directly to a chosen beneficiary and potentially have access to living benefits.

So, who is the ideal client for this approach? Prospects range in age and income level, but they tend to be older Americans who are already retired or are within 10 years of retirement. They likely have funds sitting in money market accounts, certificates of deposit or other savings products. Most important, they must be able to come up with a lump sum single premium payment.

Most SPWL policies require a minimum single premium of $5,000, but the average payment is between $40,000 and $50,000. Let’s discuss some of the ideal clients for this approach.

One such client would be a grandparent who has a specific beneficiary in mind. This type of beneficiary could be a grandchild with special needs who will require financial assistance to help get established and become financially secure in adulthood. By allocating a portion of their savings to SPWL, this client can immediately increase the amount they are able to leave to their loved one.

A financially healthy client who already donates to a favorite charity and would like to leave a substantial endowment to the organization upon their death would be another good prospect for SPWL. By transferring a portion of their savings to SPWL, these clients can experience tax-sheltered growth and a tax-free payout to the charity.


You may have older clients who are eager to improve the prospects of their children and grandchildren but still want to maintain control of their money during their lifetime in case of illness or another unexpected event. With the cash value portion of SPWL, these older clients can have access to their funds, should they need them.

Once you have established that they have the means to take advantage of this opportunity, you can speak with both existing and potential clients about the many benefits of transferring some of their savings to an SPWL policy. These benefits include:

Estate liquidity — Your client’s savings are sheltered from tax, and the full face amount is generally paid out to the beneficiary tax-free without potentially going through probate.

Convenience — Clients appreciate the lack of maintenance required once an SPWL policy is established. Because the single premium is paid in full up front, there is no danger that the policy will accidentally lapse. If a client’s financial situation changes, they will not need to worry about covering future premiums.

Tax advantages — Cash values grow tax-deferred until funds are accessed or the policy is surrendered.

Cash value — In the event of a serious illness or other unexpected financial setback, policyholders may be able to access cash value and still keep the life insurance in effect. It also may be possible to borrow against the policy, using the cash value as collateral.

Dividends — Some SPWL products have the potential to pay dividends, which can be paid out in cash, left on deposit to accumulate with interest or used to purchase additional paid-up insurance (called paid-up additions). Dividends have the potential to grow cash value and death benefit.

Although there are many benefits to transferring a portion of savings to SPWL, this approach is not for everyone. In addition, clients may be understandably reluctant to transfer their hard-earned funds out of vehicles they consider safe.

Recommending this approach requires a thorough understanding of a client’s situation and an ability to explain the benefits (and any potential drawbacks) in detail. As with all conversations about estate planning and wealth transfer, there is a layer of complexity that is not usually part of a traditional life insurance discussion.

Even after you establish that a potential

client has the portfolio flexibility to transfer a lump sum of money to an SPWL policy, it is essential for the client to understand that many of the most attractive benefits and tax advantages of SPWL are conditional.

For example, if the suggested product is a modified endowment contract, the loan amount is taxable. In addition, borrowing from the policy reduces the net tax benefit, and complete surrender of the policy could have implications for federal or state taxes.

Once clients fully understand the immediate and long-term benefits of this approach, they appreciate that they can make one payment and then reap the benefits of life insurance and retirement savings in one product. For the right clients in the right situation, this option could be the ideal solution for maximizing their estate.


Eric Miller is chief distribution officer, U.S. life and annuities, at Foresters Financial. Eric may be contacted at [email protected]

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