Permanent Life Insurance
A permanent life insurance policy provides protection for your entire lifetime, with an additional investment component for maximum return on investment. The value of permanent life insurance is that protection is ongoing – you never need to worry about the term of your policy ending or make decisions about what to do next, so your family’s security is always maintained.
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Benefits of Permanent Life Insurance
As mentioned above, the main benefit of a permanent life insurance policy is its longevity. It will be there for the duration of your life, earning value without your intervention. Along with this comes a stable premium that will never increase over the life of the policy.
Additionally, with the investment component of a permanent life insurance policy, the policy is building cash value – that is, money you can borrow against or withdraw for expenses such as a child’s college education, or money that provides additional value for your beneficiaries when you die.
The cash value growth of permanent life insurance policies are generally on a tax-deferred basis, meaning that you do not pay taxes on any earnings in the policy, nor do you pay taxes if you withdraw money from the policy.
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Drawbacks to Permanent Life Insurance
The single biggest drawback of permanent life insurance is that it costs significantly more than term life insurance. Depending on your financial status, you may not be in a position to pay the higher premium for permanent life insurance. Those who are unable to afford adequate coverage often skimp and may be underinsured as a result.
A second consideration of permanent life insurance is that requirements for approval are more involved – including a medical exam, various forms of documentation, and health history information.
Lastly, any loans that you take from the cash value that are not paid at the time of your death will reduce the death benefit and provide your beneficiaries with a smaller payout.
Types of Permanent Life Insurance
There are four categories of permanent life insurance:
- Whole Life: premiums remain the same through the life of the policy; offers death benefit along with a savings account
- Universal Life: a flexible policy that allows you to adjust your premiums and the death benefit
- Variable Life: combines insurance protection with investment in stocks, bonds and money market funds
- Variable-Universal Life: a combination of the two types of policies
Permanent life insurance is best suited for people who:
- Have a need for long term insurance coverage
- Want a policy to earn cash value to fund education, retirement or other expenses
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Concerned About the Cost of Permanent Life Insurance?
While a permanent policy is more economical over time because the premiums do not increase, it may still be too costly. For a much lower premium, term life insurance provides affordable coverage to protect your family. If the investment portion of a permanent policy appeals to you, consider investing the money you save on a term policy to yield a greater return.
Visit the Term Life vs. Permanent Life page for a comparison of the two insurance types.
Life-Insurance-Info.us is not a life insurance broker or carrier, and cannot issue life insurance policies. This site provides free information on insurance providers and coverage options. We are not associated with the companies profiled on Life-Insurance-Info.us and we make no representation, express or implied, that you will receive a quote from a specific company profiled herein. Products and policies may not be available in all states, and product and policy information is subject to change without notice. Please contact the insurance company directly to answer your policy inquiries.
Last Updated: June 16, 2009
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