PERMANENT LIFE INSURANCE 101

2Is 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 benefit"), as well as a death benefit. As a rule, Permanent Life makes sense as a savings vehicle for high-income families, or those - such as small business owners - with illiquid estates, who want to pass along cash to their heirs.

If you're considering Permanent Life, here's what you should know:

  1. Types of policies.
    1. Whole Life charges a fixed premium to fund a guaranteed cash benefit and death benefit; the shorter the pay period, the higher the premium.
    2. Universal Life offers a flexible premium that combines a Term Life policy with a bank account. You pay as much as you want, with the leftover funds earning a variable interest rate.
    3. Variable Universal Life works the same way, except that you can choose mutual fund-type options for investing your cash value.
  2. Medical exam: As with Term Life, the insurance company will require you to take a physical examination. If you have a medical problem, you'll probably pay higher premiums,
  3. Investment benefits: You won't owe state or federal taxes while the policy's cash value grows until you make a withdrawal (at which time your tax rate will probably be lower). What's more the "forced savings feature - requiring you to pay premiums - creates a financial safety net.
  4. Costs: Because Permanent Life funds the policy's cash benefit, as well as a death benefit, you'll pay significantly higher premiums than for the same amount of Term coverage. Permanent Life also sets sales, administrative, and fund-management fees, as well as a mortality risk charge. In addition, if you cash in the policy during a certain period (usually 10 or 20 years) you might have to pay a surrender fee.

For more information on Permanent Life insurance, please feel free to get in touch with us at any time.

Need insurance for You, Your Family or Your Business?
We can match you to a qualified, local insurance expert!
Further Reading
Although both term life insurance and permanent life policies have their advantages, if you prefer permanent life, here are key guidelines to help you choose the best option: All policies are not created alike. Whole Life insurance combine...
Life insurance gives you peace of mind. At the time of your death, it provides a financial payout to your beneficiaries and ensures their needs are met. Additionally, permanent policies provide numerous benefits while you're alive. Learn why permanen...
Trying to figure out how to pay for a child’s college education is a mentally exhausting task for most parents. Few people probably think of their variable, whole, or universal cash value life insurance policy as a way to pay for a college education,...
Just as one might use a CPA to prepare their income taxes or an attorney to help them with their estate planning, many choose to use an insurance agency to write their insurance policies. This choice is mainly made because a person feels they need pr...
Your business insurance value has no relation to your policy premium or your policy premiums, the value of your insurance portfolio related directly to the risks you insure against. If you are not an insurance expert, it is important for you to meet ...