Single-Premium Whole Life (SPWL): Buying Lifetime Coverage with One Payment

Single-Premium Whole Life (SPWL) is a permanent life insurance policy where the insured makes one substantial, lump-sum payment upfront to fully fund the policy. This option is popular among those with large, liquid assets who want immediate permanent coverage and tax-advantaged growth.

Advantages of SPWL

By paying the entire premium upfront, the policy benefits from immediate and maximum:

• Cash Value Growth: The cash value begins growing immediately from a large base, leveraging the power of tax-deferred compounding.
• Policy Liquidity: The cash value is available for policy loans much sooner than traditional whole life policies.

The MEC Challenge

Almost all SPWL policies are classified by the IRS as **Modified Endowment Contracts (MEC)** because they fail the 7-Pay Test (too much money is paid in too quickly). This means that while the death benefit remains tax-free, policy loans and withdrawals are subject to LIFO taxation (gains are taxed first) and potential early withdrawal penalties before age 59½.

Disclaimer: This content is for informational purposes only and is not financial or legal advice. Due to MEC status, consultation with a tax professional is mandatory before purchasing SPWL.