Is Permanent Life Insurance for you? This type of coverage, unlike term life, does not expire and provides a tax-deferred investment or savings component ("cash value"), as well as a death benefit. As a rule, permanent policies often make sense as a savings vehicle for high-income families or for small business owners with illiquid estates who want to pass cash to their heirs.
If you're considering permanent coverage, here's what you should know:
Policy details
- Types of policies.
- Whole Life charges a fixed premium to fund a guaranteed cash value and death benefit; the shorter the pay period, the higher the premium.
- Universal Life offers a flexible premium that combines a term-like death benefit with an internal account; you can vary payments and any excess earns a variable interest credit.
- Variable Universal Life works similarly but lets you allocate the policy's cash value to investment options, so returns (and risk) vary with the markets.
- Medical exam: As with term policies, the insurer will usually require a physical exam; existing health issues typically raise premiums.
- Investment benefits: Cash value grows tax-deferred while inside the policy; withdrawals or loans have different tax treatments, and the required premium payments create a forced-savings discipline.
- Costs: Because permanent coverage funds both cash value and a death benefit, premiums are significantly higher than for comparable term coverage. Policies also carry sales, administrative, fund-management fees, and a mortality charge, and a surrender fee may apply if you cancel within an early period (often 10–20 years).
For guidance on evaluating options and comparing features, see Choosing Permanent Life Insurance.
For more information on permanent policies, feel free to talk to an agent who can review your goals and illustrate costs and benefits for your situation.
Frequently Asked Questions
How is permanent life different from term life?
Permanent life provides lifelong coverage and builds cash value; term life provides coverage for a set period and generally has lower premiums.
Can I access the cash value while I'm alive?
Yes—many policies allow loans or withdrawals against cash value, but these may reduce the death benefit and have tax or fee implications.
Do I have to take a medical exam to get permanent coverage?
Most applicants must complete a medical exam or provide health information; underwriting affects premiums and eligibility.