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What is permanent life insurance?

Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella...

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UPDATED: May 19, 2020

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Permanent Life InsurancePermanent life insurance is a specific form of life insurance that covers the insured throughout his or her entire life, as long as the policy is kept current.

Whole life insurance, universal life insurance, and endowment insurance are all types of permanent life insurance.

Learn the specifics, benefits and drawbacks of permanent life insurance in the article below and then be sure to enter your zip above for free insurance quotes!

Permanent life insurance policies promise to pay a lump sum at the time of death.

Endowment policies are slightly different in that they promise to pay either at the end of a specific term, upon its maturity, or in the case of early death. Other permanent life insurance policies do not necessarily include terms as does the traditional term life insurance policies.

Permanent Life Insurance Builds Cash Value (Usually)

Permanent life insurance also usually has a savings component to it, meaning that the policy gains cash value over the course of its existence. You can turn in a permanent life insurance policy at any time and receive its cash value.

These cash value policies have this savings component on top of its regular policy. The cash comes from investments the company makes with whatever you pay over your regular premium and cost of administration fees. Some, if not most, companies will guarantee a minimum interest rate, guaranteeing you a return of some kind even if the investments are the not the best. Term policies carry no cash value.

Permanent Life Insurance Does Not Have a Renewal Date

These policies also have other benefits. The premiums do not change over the course of the policy, and you do not have to renew or change policies at the end of any terms as is the case with term life insurance, which offers a fixed rate only as long as the policy’s term, which can be a few as ten years. After the end of the term, the premium usually increases.

The cash value of these policies can be substantial, and they are easier to transfer to the beneficiary quickly. Other savings, bonds, savings accounts, etc., will be wrapped up with the estate and subject to taxes. The savings portions of permanent life insurance plans are not subject to any probate, taxes, or waiting period. The insured can also use these cash values while still alive to do estate planning.

Universal Life Insurance

Universal life insurance is one type of permanent life insurance that offers the same premium until you turn 100 years old. It is a more flexible and transparent insurance policy than insurance policies have historically been.

Universal life insurance offers you several investment options, and well as letting you know where and how much has been invested on your behalf, and what the return has been to date. In comparison, whole life insurance also offers more flexibility, but does not let you know as many of the particulars about the investment.

Universal life insurance policies also offer you the ability to choose between death benefit options. A less expensive policy option allows the company to pay the death benefit out of the cash value first; the more expensive option pays out both the full policy benefit and all the accrued savings. These types of policies offer much in the way of flexibility regarding benefits and designing your policy to meet your specific needs.

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Flexible Premium Payment Options

There are many options for how to pay and how much to pay in terms of premiums, such as the decision to pay just the minimum, or nothing at all one month, or the maximum allowed by the Internal Revenue Code. You are not bound to always pay beyond the premium minimum, though if you don’t pay much more than just the minimum, you will not accrue a large amount of savings, which may not make the policy ideal for you. Also note that some of this flexibility in payment is characteristic of universal life insurance primarily, and does not necessarily apply to whole life insurance policies, where the premium payments are fixed and the policies can lapse from not paying.

Variable Life Insurance Policies

Variable universal life insurance polices also build cash values, and allows you to split the savings/investments into multiple accounts, sort of like mutual funds. This gives the holder a lot of choice in determining which account is used, and also the flexibility of traditional universal life insurance policies in determining how much of a premium you pay.

Permanent Life Insurance is Best for…

Permanent life insurance policies are ideal for those who can often pay above the premium, allowing for the chance to build up a good amount of savings. You will want to talk with your insurance provider to see if this is the correct path for you based on your needs. If you want the ability to save up more, this policy may not be for you, as there are laws governing how much money can be saved in this kind of account before being taxed. The same holds true for those who may not have the means to consistently pay beyond their premiums.

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