Is 10 Pay Whole Life Insurance Any Good?

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Key Things to Know

10 Pay Whole Life Insurance is a policy that guarantees a death benefit after 10 years of premium payments, making it a cost-effective option for those prioritizing a guaranteed death benefit. While it offers a lower total cost for a guaranteed death benefit compared to longer-term policies, it may not be the best choice for maximizing cash value build-up. Ideal candidates for 10 Pay Whole Life Insurance are those who can commit to the full 10-year premium period or have a stable income source to cover the payments.

Policy Description: A whole life insurance policy that is contractually paid up after 10 years, guaranteeing the death benefit for the rest of the insured’s life.
Financial Consideration: Offers the cheapest death benefit compared to other whole life insurance policies with longer payment periods.
Premium Structure: Requires a higher annual premium compared to policies with longer payment periods, but results in a lower total premium paid over the life of the policy.
Ideal Candidate: Individuals seeking a short commitment for a guaranteed paid-up death benefit, often those with the means to pay all premiums upfront or a stable income source to cover them.
Cash Value Build-up: Not the best option for maximizing cash value build-up compared to other whole life policies.
Death Benefit Focus: Most buyers prioritize the guaranteed death benefit over cash value accumulation.

10 Pay whole life insurance is an insurance policy that is contractually paid up after 10 years. Once the policyholder makes payments for 10 years, the policy contract guarantees that the death benefit will remain in force for the rest of the insured’s life and the insurance company cannot terminate the policy.

In addition, as a whole life policy, the policy will continue to accumulate guaranteed policy cash value and—if eligible—earn dividends.

The attactivness of 10 Pay Whole Life Insurance is the relatively small commitment of time one pays premiums to achieve paid-up status. But, the cost of these premiums for a given level of death benefit will appear extremely high when compared to other forms of whole life insurance with longer payment periods (e.g. paid up at age 100).

Is it worth it? Depends on whom you ask.

Cheapest Death Benefit you Can Buy

In terms of total cost of premiums, 10 Pay Whole Life Insurance is tough to beat. If you need a certain level of death benefit guaranteed for the rest of your life, the seemingly steep price of 10 Pay is worth the payment if you look at the complete cost of alternative whole life policies for their entire premium paying period.

For example, a $1,000,000 death benefit policy for a 45-year-old male at standard rates for a whole life policy paid-up at age 100 costs around $20,290 per year. Making all the payments to age 100 means you’d pay a total of $1,115,950. Alternatively, a $1,000,000 death benefit 10 Pay Whole Life policy from the same company costs $56,210 per year. So opting for the 10 Pay route requires only $562,100 in total premiums paid for the same death benefit. That’s about 50% fewer dollars paid to the insurance company.

Insurers are willing to do this because collecting more premium up front allows them to invest those additional dollars and make up the reduced premiums received through investment gains.

Not Always the Best Cash Value Deal

While 10 Pay Whole Life Insurance does a great job securing lower-cost guaranteed death benefit, it’s not always a great option for those seeking cash value build up maximization of a whole life policy.

Using the same example from before, that $56,210 annual premium build up $632,810 dollars in cash value by the end of year 10. That’s more cash value than premiums paid, but we could make use of some fancy life insurance manipulation to create a whole life policy from the same company that would turn $56,210 in premiums paid into a cash value after 10 years of $671,410. And we could still have a paid-up policy after 10 years going this alternative route if we wanted.

1o Pay Whole Life Example:

Non 10 Pay Whole Life Example:

Ideal Candidate for 10 Pay Whole Life Insurance

The best candidates for 10 Pay Whole Life Insurance are those seeking a short commitment for a guaranteed paid-up death benefit. Generally, this is someone who either has all the cash on hand to pay all 10 premiums, or someone who has some mechanism in place to cover all 10 payments. This could range from stable employment, a contracted job lasting at least 10 years, or an asset they can match to the premium payments (e.g. a bond position paying interest sufficient to cover the premiums due over the 10 year period).

While some people in the life insurance market for high cash value whole life insurance might look at 10 Pay, they will most likely find better options in other whole life policies. For this reason, most 10 Pay buyers are more motivated by the guaranteed death benefit than cash value build up.

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