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.
Whole life insurance, sometimes called "straight life" or "ordinary life," is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid.
Permanent life insurance is an umbrella term for life insurance plans that do not expire, unlike term life insurance, which promises payment of a specified death benefit within a specific period of years. ... The two primary types of permanent life insurance are whole and universal life insurance policies.
The concept of permanent life insurance is pretty simple: Pay an annual premium, and when you die, your beneficiaries collect a payout. It protects your family from a loss of income, immediately builds an estate and covers debts in the event of your passing. Permanent life insurance lasts until the death of the policyholder and includes a "cash-value" investment component. Best Life Insurance for people in the Reno area
Another form of life insurance called term life insurance lasts for a specific term, such as 10 or 20 years, instead of a whole lifetime, and is often used by people with growing families to guard against an economic catastrophe in case of an early death.
Whole or ordinary life
This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
Universal or adjustable life
This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments - providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
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: