Another variation of whole life to consider is limited-payment life insurance, which calls for premiums to be limited to a specific number of years. These types of plans allow you to pay your full premium on an annual basis for a specified number of years. This allows you to have an annual “paid up” policy for 10 or 20 years or until a specified age. For instance, if you take out a policy with a 10-year term, you will initially pay 10 yearly installments.
While the premiums will be more expensive than a regular ordinary life policy, you can effectively speed up the payment period, notes Edward E. Graves, author of “McGill’s Life Insurance.”
These contracts give you the option to have a lesser number of premiums at a higher price or a larger number of premiums at a lower cost. In either case, you’ll pay the same amount in the end—it’s just that the regular amounts will differ. If you’d rather pay premiums up to a specified age like 60 or 70, this is another option.
It’s worth noting that while the fewer premium/higher cost design will require you to spend more over a shorter period of time, it provides higher cash and surrender values. This provides you with more funds for emergencies or retirement purposes than a traditional ordinary whole life insurance policy.
If you can afford it, a single-premium life insurance policy gives you the chance to pay your premium in one lump sum. These policies offer limited protection in comparison to other contracts, but provide several investment and liquid cash opportunities. But beware, if you decide to cash in the policy before the term is up, you will be hit with hefty early surrender charges and fees, so there’s a good chance you will receive less back than you initially paid into the policy.