Single Premium

What Does Single Premium Mean?

A single premium is a one-time payment for an insurance policy, serving as an alternative to making periodic payments. The insurance payout from a single premium policy is either paid to the insured upon the policy’s maturity or to the beneficiary as a death benefit, without the need for any additional payments before these events.

Insuranceopedia Explains Single Premium

Since a lump sum payment is required, the insured must have a substantial amount of cash available to pay a single premium for their insurance. This payment structure is most commonly used with permanent life insurance, where the lump sum funds lifelong coverage without the need for ongoing premiums.

One advantage of a single premium policy is that the insured no longer has to set aside money to prepare for future payments. The cash value of single premium policies also increases more quickly compared to policies that are paid monthly, quarterly, or annually. Because the entire payment goes in upfront, single premium plans are also among the policies that build immediate cash value from the start.

While the insurer can no longer ask for payments from the insured, the latter may have the option of withdrawing a fraction of the total amount to pay for a financial emergency.