20 Pay Life Insurance: What Is This? How Does It Work?

Shawn Plummer

CEO, The Annuity Expert

What is 20-pay life insurance? 20 Pay Life Insurance is a type of Limited Pay Life Insurance (typically Whole Life Insurance) that requires payments over 20 annual installments. 20 Pay Life Insurance can be used as an additional source of income for the family or to help cover monthly expenses in the event of your death.

What Is A 20 Pay Life Insurance

A 20 Pay Life Insurance Policy is designed for people looking for limited-level premiums with cash value growth and permanent death benefit protection. You pay 20-level annual premiums, but the death benefit is guaranteed for your lifetime. This can be an effective way to ensure your premiums end by retirement age.

What Is A 20 Pay Life Insurance

20 Pay Life Insurance Benefits

  • Guaranteed Level Premiums: The insurance is paid up after 20 yearly premium payments.
  • Guaranteed Lifetime Coverage: Your coverage cannot be discontinued as long as premiums are paid and policy loans do not exceed the entire cash value.
  • Tax-Deferred Cash Value Accumulation: Your insurance plan is set up to accumulate cash value each year on a tax-deferred basis. You can take advantage of policy loans and withdrawals to help pay for a big purchase, add to your retirement income, or provide in times of need.
  • Policy Dividends: A dividend may be paid on your 20 Pay Life Insurance Policy.
  • Living Benefits: A portion of the death benefit may be used to pay for medical expenses if you have a medical condition, terminal illness, or chronic illness.

You Can Use Your IRA Money

20 Pay Life Insurance policies are designed for seniors up to age 80 that will accept funds from an IRA. The owners will convert the taxable retirement plan into a tax-free death benefit on Day 1. These policies include a single-premium life annuity (SPIA) and a 20-pay hybrid policy. The retiree transfers the funds into the hybrid policy without a taxable event. The policy distributes money from the IRA (via the SPIA) into the 20-pay life insurance policy over 20 years. The retiree reports the taxable distribution each year for 20 years.

20 Pay Life Insurance Companies (We Recommend)

While 20-pay life insurance is an excellent option for some, it may not be the best choice for everyone. The main advantage of this type of policy is that your premiums are paid in full after 20 years. Therefore, this can be a great way to save money in the long run, as you won’t have to keep paying premiums to keep your policy active. However, the downside is that your premiums will be higher than if you were to pay premiums for life. As a result, it’s essential to weigh the pros and cons of this type of policy before making a decision.

  • We recommend Lafayette Life for this type of policy.
  • They have an A+ rating with A.M. Best and a strong Comdex score of 96.
  • Plus, they pay dividends.

Disclaimer: We are licensed life insurance agents for Lafayette Life. If you need a quote or want to apply, contact us below. There is no charge for the service. We strongly discourage applying without the assistance of an agent because if you apply on your own and get declined coverage, for whatever reason, no other life insurance company will consider you for coverage for approximately two years.

Next Steps

Whether a 20-pay life insurance policy is the right choice depends on your circumstances. This may be a great option if you’re looking for a way to save money in the long run. However, it’s essential to weigh the pros and cons of this type of policy before making a decision. Contact us today for a free quote, and we can help you decide if this is the right choice.

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Frequently Asked Questions

What is 20-year level term life insurance?

20-year level term life insurance is a type of life insurance that provides coverage for a set period of 20 years, during which the death benefit and premium remain the same. It is designed to provide financial protection for dependents in the event of the policyholder’s death during the term.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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