When thinking of life insurance, you may imagine paying premiums year after year until the end of your life, when your heirs receive the death benefit payout. With a 20-pay policy, however, premiums end after 20 years, while the benefits continue.
Would a 20-Pay Policy Work for You?
Whether you should purchase 20-pay life insurance depends on your goals. You might consider this type of policy for several reasons:
- You want to give a financial gift to a young person. Because premiums of a 20 pay whole life insurance policy are only paid for 20 years, a policy that you buy for a newborn grandchild could be completely paid for by the time he or she graduates college. While the death benefit may not mean much to a young person, your gift could take on new meaning if he or she ever needs to draw on its cash value.
- You want to diversify your investments. If you like the idea of dividend income in retirement, you may be happy to know that dividend-paying stocks are not the only source of dividends you can buy.
- You want the death benefit for your heirs. You want to leave a large-enough nest egg to cover funeral expenses and other costs that your heirs may incur. Like all whole-life insurance, 20 pay lets you do this without the need to use other assets to meet these expenses.
If you can afford higher premiums, 20 pay can be an appealing whole-life option.