Single premium life insurance Knoxville is a valuable investment when it comes to wealth creation and transfer. With this type of life insurance, a single premium is deposited, creating an immediate death benefit that is guaranteed until the owner passes away. The death benefit will depend on the amount deposited, gender, age and health of the insured. In many cases, the single deposit will be multiplied by a factor of two or more when the death benefit is calculated. Typically the younger the insured, the higher the benefit received. For instance, a 65 year old healthy, non-smoking woman who deposits $100,000 into a single premium life policy could pass $200,000 or more in death benefit to her beneficiaries. Moreover, the benefit is income tax free to her recipients!
Benefits of Using Life Insurance to Transfer Wealth
Single premium life insurance Knoxville can also benefit the insured or the purchaser during his or her lifetime. The cash value in a fully funded policy will grow quickly and can provide income to the purchaser if needed. In turn, the purchaser can also surrender the policy for its cash value at any time. A few policies guarantee the cash value to be no less than the one time deposit. This way, if the insured needs to surrender the policy due to unforeseen circumstances, he or she is guaranteed to get the investment back. The insured also has the option of taking a loan against the policy instead of surrendering the contract if desired.
Other policies have the option of an accelerated death benefit* that can be drawn on to pay for long term care coverage. By invoking this rider, the woman in the example above would have $200,000 available to her for long term care expenses in her home or a nursing home facility- and these benefits could be received income tax free. In this example she avoids premium payments into a traditional long term care policy and still rests assured that she has significant nursing home protection if necessary. The insurance policy improves the estate in two ways. The life insurance policy will pass increased wealth to the beneficiary or protect an estate from the considerable costs associated with long term care. (*The accelerated death benefit can also be utilized if the insured is diagnosed as terminally ill with twelve months or less of life expectancy.)
Choices for the Elderly
Many elderly consumers feel that they are not healthy enough to purchase life insurance in their golden years. This is simply not true. Simplified underwriting allows many seniors to qualify for life insurance. With simplified underwriting, there is no physical or blood work needed. So long as the proposed insured can answer no to a few questions, underwriting can be done using the answers on the application and a quick telephone interview. The fact is single premium life insurance is not difficult to purchase. Those who feel they are in extraordinary health can choose to go through advanced underwriting and may qualify for increased insurance benefits.
Tax Advantages of Life Insurance
Certainly the advantage of life insurance over an annuity, a savings bond, a certificate of deposit or other investment is the favorable tax treatment of a life policy. The entire death benefit is passed income tax free to the beneficiary. However, the death benefit can count toward the gross value of an estate for estate tax purposes. To avoid estate taxes, some policies are owned by the beneficiaries or an irrevocable life insurance trust. It is crucial to work with a knowledgeable agent and attorney if estate taxes are a concern.
Often single premium life is considered a modified endowment contract or MEC by the IRS. The policy can be taxable to the owner if gains are withdrawn- just like an annuity or savings bond can be taxable to the owner. If the owner is under the age of 59 ½ the IRS can access a 10% early withdraw penalty. Thus these policies are best utilized when the funds are likely not needed in the immediate future.
In conclusion, life insurance Knoxville can be one of the safest and most dependable investments for many families. Life insurance Knoxville is especially valuable due to the favorable tax treatment and guaranteed returns associated with these policies. It is important to choose a well rated company and an informed advisor to select the best possible policy for your future.