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

Shawn Plummer

CEO, The Annuity Expert

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 7 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.

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What Is A 7 Pay Life Insurance

A 7 Pay Life Insurance Policy is designed for people who are 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 make sure your premiums end by retirement age.

What Is 7 Pay Premium

7 Pay Life Insurance Benefits

  • Guaranteed Level Premiums: After 7 level yearly premium payments, the insurance is paid up.
  • 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. To help pay for a big purchase, add to your retirement income, or simply provide in times of need, you can take advantage of policy loans and withdrawals.
  • 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 in the event you have a specified medical condition, terminal illness, or a 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, 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 consist of 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 7 years. The retiree reports the taxable distribution each year for 7 years.

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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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