A SinglePremium Life (SPL) is a type of insurance in which a lump sum of money is paid into the policy in return for a death benefit that is guaranteed until you die. The size of the death benefit depends on the amount invested and the age and health of the insured.
A Certificate of Deposit (CD) is a savings certificatewith a fixed maturity date (terms usually from 6 to 60 months) and a fixed interest rate. CDs are generally issued by banks and credit unions and are insured by the FDIC or NCUA.
Both a Single Premium Life and Certificate of Deposit are often used by people who want to leave a legacy to their children or a charity or save it for themselves in case of an emergency.
The key benefits to a Single Premium Life vs. a CD:
- The growth of a Single Premium Life Insurance policy is tax deferred and the death benefit is tax free. In a CD, the earnings are taxable each year as income.
- The immediate cash value of a SPL policy is the amount of the premium and there is no surrender value. The SPL leverages the death benefit to 2 to 3 times the amount of the premium. This means that the beginning cash value is the same as the premium and is based on an index such as the S&P 500, which means the account will be credited up to 10% per year with the 10+ year average being about 6% with a 3% guarantee over any ten year period.
- A SPL policy can immediately increase the amount of your legacy compared to the slow growth of a CD. A CD pays in the range of 1 to 2%, depending on the financial institution and length of term.
- A SPL provides better liquidity than a CD.
- A SPL provides no cost to surrendering the policy.
For a complimentary financial or life insurance consultation, please contact me at 909-714-1830 or at email@example.com.