What is Permanent Life Insurance?
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UPDATED: Aug 13, 2020
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If you are shopping for life insurance, then you will need to be familiar with the term permanent life insurance. Permanent life insurance policies differ from term life because they last for your entire life, and provide some additional benefits such as cash value accumulation, financial planning, and policy loans when you need cash quickly. However, the policies tend to be more expensive and inflexible. The best life insurance policy for you depends on your individual situation, so you need to get all the information you can about permanent life insurance before you make a decision.
What is Permanent Life Insurance?
Permanent life insurance policy offer long term protection for life, and has some features that you need to be aware of before you purchase:
- Because you buy it for the duration of your life, the payout of a death benefit is certain. Your named beneficiaries will get the benefits of your policy.
- Permanent life insurance usually comes with a fixed premium, meaning the premium payments stay the same throughout the life of the policy. This can be very advantageous when you purchase a permanent life insurance policy while young and healthy. Take for example the purchase of a permanent life policy of $100,000 at age 20 for $30 a month. At age 65, you will still pay $30 a month regardless of your health.
- Permanent life insurance accrues cash value that can be used for a few reasons:
- You can borrow against the cash value when you are in need of a loan. This loan is automatically given.
- Cash value increases the death benefit over time. In the example above, the death benefit at age 65 might be $120,000, but because the policy has accrued an additional $20,000 in cash value, the total death benefit can be $140,000.
- The cash value can pay up the policy, which allows the owner to stop making the premium payments.
- Permanent life insurance is generally more expensive. Because of the guaranteed payout, the steady rates, the accumulation of cash value, and other qualities of permanent plans, the premium payments will be higher.
Types of Permanent Life Insurance
There several types of permanent life insurance policies that offer different benefits that you need to be aware of. Whole Life, Universal Life and Variable Life are all types of permanent life insurance that you should know about. Universal and variable life insurance plans have an additional benefit of having a savings and investment component that allows your money to grow, and your life insurance policy to become a strong part of your financial portfolio.
One of the greatest benefits of permanent life insurance is it provides the security that you will always have insurance when needed, and have a financial plan in place. If you have any questions about what type of permanent life insurance is right for you, ask an experienced agent today.
Is Purchasing Term Right for You?
While Permanent Life insurance policies might be appropriate in some situation, many buyers could provide a better life insurance benefit for less money by choosing a term life insurance plan. Buying term insurance can save money. Take for example if you purchased a 250,000 Whole Life Policy at the age of 30. It may cost you $74 dollars a month. A 20 year term life policy with the same death benefit could cost you $20. The difference of $54 dollars a month could be invested in another investment vehicle for a better rate of return, or rolled into your regular budget.
You should make a thorough comparison of term and permanent life before you make a decision. Have your agent conduct an insurance analysis review to determine what type of life insurance is best for your situation, your age and your family.
TIP: What coverage is best for your age, goals and family structure can best be determined by a reputable agent that can guide you in making the best selection!
There are some good reasons to buy permanent insurance, and getting a permanent life insurance quote is easy! To get a permanent life insurance quote, click here to have a reputable life agent in your area contact you!
Read more about finding the right type of life insurance by clicking here.