Permanent Life Insurance
What Is Permanent Life Insurance?
Permanent life insurance refers to a variety of life insurance products intended to provide you and your loved ones with life-long protection. One of the most common types of permanent life insurance is one you've likely heard of: Whole Life Insurance. But, there are a several types of customizable permanent life insurance policies available. All of them are designed to cover you until your death. Like with any life insurance purchase, it's important to match the right type of permanent insurance coverage to your individual needs. We'll review a few common types of permanent life insurance coverage, and reasons people choose those policy types to help you make the most informed decision possible.
An attractive aspect of securing permanent life insurance is that it typically affords you the opportunity to lock in a fixed rate of premium. Level premium insurance means that the amount you pay towards your policy will remain unchanged over time so long as you make your premium payments as scheduled. These payments can usually be made on a monthly, semi- annual or annual basis.
What is Cash Value Life Insurance?
In addition to predictable premiums, some permanent life insurance policies, like whole life and universal life, come with interest earning cash value. In fact, permanent life insurance policies are sometimes referred to as “cash value life insurance” policies. Life insurance with cash value is designed to grow in total value at a guaranteed rate of return (provided that you make your premium payments on schedule). You can typically borrow funds from the total cash value of your policy. Additionally, the cash-value funds accrued with a permanent life policy are tax deferred in many cases. Because of this savings capability offered by some types of permanent coverage, premiums are often higher for permanent life policies than for term life policies. However, the premium amount due on a permanent policy will remain the same over time, while the term life insurance premiums can go up significantly each time you* renew.
- Learn more about cash value life insurance policies
Which Type of Permanent Life Insurance
Is Right for Me?
Whole Life Insurance
Whole Life insurance is permanent life insurance coverage often chosen by individuals who want to lock in a fixed rate of premium for the rest of their life. Though whole life policies can be more expensive than some other types of life insurance, the long-term financial predictability of obtaining lifelong level premium is appealing to some. Whole life insurance carries cash value which typically grows on a tax-deferred basis. These product features may make whole life a good choice for individuals with the larger budgets to work with. This type of coverage might be also good fit if you are concerned about your predisposition for illness or diseases based on your family history. This is because you will not be asked to complete additional medical exams once your policy is in place.
- Learn more about Whole Life Insurance and how it could help your family
Universal Life Insurance
Universal life insurance is a type of permanent life insurance coverage similar to whole life insurance that offers more flexibility in premiums than whole life coverage. Universal life carries interest earning cash value much like whole life insurance. However, universal life policies also have the added benefit of adjustable death benefits. This means that (in most cases) you can make changes to your policies death benefit as your needs may change. Because of this, universal life coverage may be a better fit for younger people looking for a permanent insurance option as well as those who are unsure of their future needs.
- Find out more about Universal Life Insurance and decide if its right for you
Guaranteed Issue Whole Life Insurance:
No-Medical-Exam Life Insurance
Guaranteed Issue Whole Life Insurance, sometimes called Guaranteed Acceptance Whole Life Insurance, is a type of permanent life insurance coverage that was initially developed for adults ages 50-85. With up to $25,000 in guaranteed issue coverage, some people also call GIWL “no medical exam life insurance”. It is often chosen by older adults who are looking to provide their loved ones with funds to handle their final medical bills and remaining expenses following their passing. GIWL may be a good fit if you already have life insurance coverage of some kind but are looking for a policy with smaller face value to help with final expenses.
- Learn more about Guaranteed Issue Whole Life Insurance with no medical exam
Converting Your Term Life Insurance to a Permanent Life Insurance Policy
If you currently hold a term life insurance policy, you may be able to convert that coverage into a permanent life policy. Common reasons for choosing to convert from term to permanent life insurance include:
- Permanent insurance has the option to build cash value. Even the best term life insurance policy does not.
- The money accrued with permanent insurance is tax deferred. In other words, while the money remains in the policy, you won't pay federal income taxes on it.
- Under current tax laws, your loved ones will not pay federal income taxes on any death benefits. (This is also true when you buy term life insurance.)
- You can access the cash value of your permanent insurance.
- It costs nothing to convert your term life insurance to permanent insurance.
- You can often choose to convert all or just part of your term life insurance policy to permanent insurance.
- Some permanent insurance policies will cover you all the way to age 100.
For more information about converting from term to permanent life insurance: