Single Premium Whole Life [2021 Guide]

Quick Tip: For a traditional whole life insurance rate fill out the form on the right. We will have to provide an illustration for an SPWL policy

What Is Single Premium Whole Life Insurance

A single premium whole life policy, sometimes known as single premium life insurance is when a consumer purchases a whole life policy and pays one lump sum premium. When a consumer does this it is usually because they have a lot of cash on hand.

In addition, when you purchase a single pay whole life it is also considered a Modified Endowment Contract, or a MEC. These types of pf policies have their own tax characteristics.

Unlike term life insurance, an SPWL is a cash value life insurance policy that immediately starts to accumulate cash value.

How Does A Single Premium Whole Life Policy Work

If you are wondering how this type of policy works you are not alone. In fact, I speak to clients all the time about this and it can be confusing to the client. For instance, you hear all these acronyms and tax ramifications.

In addition, these types of policies have a lump sum deposit with a guaranteed death benefit until you die. However, the cash value deposit is immediately available for loan withdrawal but are taxed under MEC.

Benefits Of Single Premium Whole Life Insurance

There are some really good benefits when purchasing an SPWL policy. For example, you have inflations protection. In addition, there are some tax benefits that are tax-deferred if you make no withdrawals.

Furthermore, you will also not have to make premium payments as you paid one lump sum. Here are some of the perks that come with SPWL.

  • Single Payment
  • Long Term Care Insurance
  • Terminal illness
  • Cash Value
  • Investment

Once the premium is paid the life insurance contract is binding between the insured and the insurance company.

Single Premium Whole Life Insurance With Long Term Care

Let’s face it, as we get older we will accrue more health care costs. If you are on the verge of qualifying for Medicaid coverage then it might make sense to purchase an SPWL policy.

Life insurance companies that offer long term care benefits through cash value life insurance such as a whole life policy will give you options if long term care costs rise. In fact, having long term care expenses will be offset with an SPWL as the cash value grows faster because of the lump sum payment.

Above all, nursing home care can be as much as $250 a day. So having a paid-up whole life policy that is gaining tax-deferred will help offset those costs.

Single Premium Whole Life Insurance Pros Cons

Let’s keep this simple. If you are up to this point you have a pretty good idea why you would get this policy. But lets recap.


  • Tax-deferred
  • Cash Value Growth from day 1
  • Access to money from day 1
  • Accelerated death benefits


  • Modified Endowment Contract MEC
  • A large amount of premium in the initial payment
  • Income taxes from policy loans

Is A Single Premium Whole Life Policy A Mec

Yes, it is. Any single premium whole life is a Modified Endowment Contract and will be taxed as such. A SPWL policy is considered a permanent life insurance policy that accumulates cash value on a larger scale than a lifetime pay whole life.

This is defined as such because it exceeds the IRS limits based on a 7-pay test.

What Is The 7 Pay Test

The 7pay test is the amount of time and the limits of the amount of money that you can put into a life insurance policy for the first 7 years. In fact, Congress passed a law in 1988 called the Technical and Miscellaneous Revenue Act or know as TAMRA.

Before TAMRA was placed into law life insurance contracts were very attractive. Before 1988, this money grew tax-deferred and a large sum could be withdrawn tax-free.

Overall, any withdrawal made before 59 1/2 will be subject to a 10% tax.

The death benefit will always be tax-free!

Single Premium Whole Life Carriers

Above all, it is just as important in who you purchase a single premium whole life than where you purchase it from. You need to do business with an agent that is experienced in these policies.

In fact, most insurance carriers will have different dividends they pay and different interest rates. You want to make sure you are with the best carrier possible to meet your specific goals.

Who Is The Best Single Premium Life Insurance Carriers?

Here are our top 5 carriers we use for SPWL:

  1. American National ANICO
  2. Foresters Financial
  3. Assurity Life
  4. Protective Life
  5. Lincoln Financial Group

Single Premium Whole Life Insurance Illustration

Above all when you are shopping for the right single premium whole life it will really come down to the illustration. For example, the illustration will tell you the dividend, the interest, riders, living benefits, and long term care. But most importantly, the cash value accumulation.

Here is a video of me actually building an illustration for a 50-year-old healthy male with a $100,000 single pay. We will look at cash value every year until retirement.