Friday, February 08, 2019

Long time, First time

I've been in this business for almost 4 decades, and pretty sure just sold my first Juvenile SPWL plan.

And so...?

Well, SPWL stands for Single Premium Whole Life, and it's a way to (inexpensively) pre-pay a life insurance plan. Now, it's not for everyone (no product is), but in the right circumstances, it can be most useful.

As in this case.

I recall (vaguely) from Insurance 101 that parents buying their grandkids life insurance is a great idea (again often, not always) and I've had a few clients do that. But they were (as far as I can recall), of the "pay-as-you-go" variety. In this case, Gramps paid a little less than $1,900 and his new grandbaby is insured for $25,000 for the rest of his life. And, as FoIB Jeff M points out, who knows, this may turn put to be the only plan the little guy will ever be able to buy.

So, what's the advantage of a Single Pay plan? Well for starters, Junior there will never have to pay any premiums. Plus, it's at his age 0, meaning rates go up from here. And, of course, what a loving gift from his Grandfather.

Now the downside is that these plans are by definition "Modified Endowment Contracts" (MEC's), which means that the cash value that will begin to accrue won't have all of the tax advantages of a "regular" plan. But since that's not a goal here, no harm or foul.

Oh, why does one buy life insurance on a child?

Well, for a variety of reasons., For one, as noted above, it guarantees that they'll always have at least some life insurance protection, no matter what life eventually throws at them.

And, as co-blogger Bob is fond of noting, it's really more about buying time; that is, time for the parents to mourn without having to worry about losing dollars from missing work.

Pretty powerful incentive, that.
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