Legal Definitions - single-premium insurance

SINGLE-PREMIUM INSURANCE

Single-premium insurance is a type of life insurance where the policyholder pays a lump sum of money upfront to the insurance company. This payment is usually a large amount and covers the entire cost of the insurance policy. The policyholder does not have to make any further payments after the initial lump sum payment.

For example, John purchases a single-premium life insurance policy for $100,000. He pays the entire amount upfront to the insurance company. The policy will provide a death benefit to John's beneficiaries when he passes away. John does not have to make any further payments for this policy.

Another example is Sarah, who purchases a single-premium annuity. She pays a lump sum of $50,000 to the insurance company. In return, the insurance company will provide her with a guaranteed income stream for the rest of her life.

Single-premium insurance is a convenient option for individuals who have a large sum of money available and want to secure their financial future. By paying a lump sum upfront, they can ensure that their beneficiaries will receive a death benefit or they will receive a guaranteed income stream for the rest of their life. The examples illustrate how single-premium insurance works and how it can benefit policyholders.