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

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is 7 Pay Premium Life Insurance? 7-Pay Life Insurance is a type of Limited Pay Life Insurance (typically Whole Life Insurance) that requires payments over seven annual installments. Seven-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 7 Pay Life Insurance

A 7 Pay Life Insurance Policy is designed for people looking for limited-level premiums with cash value growth and permanent death benefit protection. You pay 7-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 7 Pay Premium

7 Pay Life Insurance Benefits

  • Guaranteed Level Premiums: The insurance is paid after seven 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 use 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 7 Pay Life Insurance Policy.
  • Living Benefits: A portion of the death benefit may be used to pay for medical expenses if you have a specified medical condition, terminal illness, or chronic illness.
7 Pay Life Insurance

You Can Use Your IRA Money

There are 7 Pay Life Insurance policies designed for seniors up to age 80 who 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 7-pay hybrid policy. The retiree transfers the funds into the hybrid policy without a taxable event. The policy then distributes money from the IRA (via the SPIA) into the 7-pay life insurance policy over seven years. The retiree reports the taxable distribution each year for seven years.

7 Pay Life Insurance Quotes

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Frequently Asked Questions

What is the 7-pay rule for iul?

The 7-pay rule for IUL (Indexed Universal Life insurance) pertains to a test under U.S. tax law. Suppose premiums paid over the first seven years of a life insurance policy exceed the cumulative amount needed to provide paid-up future benefits in 7 years. In that case, the policy becomes a Modified Endowment Contract (MEC). MECs face less favorable tax treatment for loans and withdrawals.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

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

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