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Single Premium Insurance Policy?
Old 05-17-2012, 12:12 PM   #1
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Single Premium Insurance Policy?

A buddy of mine called (he's retired). Just closed on a house and someone tried to sell him a Single Premium Insurance Policy for his wife. They'd give the guy $25K, and, X-years from now, will get $67K(?). I tried to explain that mixing insurance and investments is not a good idea. Problem is, I am unfamiliar with this product. Can anyone give me some idea as to whether it's a "bad thing" or other cautions related to this program.

My instinct is, the guy they talked to is a salesman, he has no fiduciary interest in my friend or his spouse and this will likely be an expensive, less then productive way to spend a good deal of money.

Can anyone help me on this?

Rich
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Old 05-17-2012, 12:18 PM   #2
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What kind of policy are we talking about? Life insurance? Something else?

I have seen single premium life, annuity, LTC and even homeowner's policies.
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Old 05-17-2012, 12:23 PM   #3
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It's almost certainly a bad deal for your buddy but you didn't give me enough details to say for sure.

The "very rich" can justify buying a single premium life insurance policy to help with estate taxes. Essentially, they buy the policy for "x." When the person dies, the estate receives the cash (many times x) which can be used to pay any estate tax. This can help keep a family business intact. There are also ways of gifting the insurance and handling it outside of the estate. If this is the reason, get a good estate planning attorney.
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Old 05-17-2012, 04:02 PM   #4
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I'll get more details from by buddy. He's not financially savy and I am afraid the salesman has spotted a couple with a few dollars and is looking to relieve them of some of their dough.

Thanks,

Rich
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Old 05-17-2012, 05:47 PM   #5
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It's probably a single premium whole life policy. $67k is almost certainly the death benefit, not cash value.
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Old 05-18-2012, 03:35 PM   #6
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Maybe is longevity insurance?
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Old 05-18-2012, 09:04 PM   #7
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Quote:
Originally Posted by dgoldenz View Post
It's probably a single premium whole life policy. $67k is almost certainly the death benefit, not cash value.
+1 the only sensible reason that I can think if is if the retired buddy has a pension with less than 100% joint benefit and he is buying a SP life policy with the plan that his wife would use the life insurance death benefit to buy a SPIA upon his passing that has a monthly benefit equal to the excess of his monthly pension benefit over his wife's survivor benefit.

Unless it is something along these lines, I would be skeptical.
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Old 05-18-2012, 09:41 PM   #8
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Originally Posted by pb4uski View Post
+1 the only sensible reason that I can think if is if the retired buddy has a pension with less than 100% joint benefit and he is buying a SP life policy with the plan that his wife would use the life insurance death benefit to buy a SPIA upon his passing that has a monthly benefit equal to the excess of his monthly pension benefit over his wife's survivor benefit.

Unless it is something along these lines, I would be skeptical.
If that was the plan, a single-premium UL policy would get him twice as much death benefit for the same price.
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