Permanent Life Insurance
Permanent life insurance provides lifelong protection. As long as the policy premiums are paid on time, your designated beneficiary will receive a payout after you pass away.
Permanent life insurance policies can accumulate a cash value that can be withdrawn, borrowed against or even used to pay the policy premiums. Sometimes a permanent life insurance policy may even pay out dividends.
The most common types of permanent life insurance are:
Types of Permanent Life Insurance
Each type of permanent life insurance policy is designed for a specific need.
- Whole life insurance
Whole life insurance premiums remain level for the life of the policy. Whole life policies include a cash value that can accrue over time.
- Universal life insurance
Many universal life insurance policies give you the ability to adjust your policy premiums as your needs change over time. Like a whole life insurance policy, a universal life policy can accrue case value over time. In many cases, you can use this cash value to pay your policy premiums.
- Variable life insurance
The cash value tied to a variable life insurance policy can include investment features like money market funds, stocks and bonds. Similar to whole life insurance and universal life insurance, variable life insurance gives you permanent protection, as long as your policy premiums are paid on time.
Who Should Purchase Permanent Life Insurance?
Permanent life insurance can be beneficial for people in a number of situations.
- You have a large estate
Estate taxes can take a significant chunk out of an inheritance. If you have a sizeable estate, a permanent life insurance policy can help offset some of the estate taxes that may be owed by your heirs.
- You wish to leave a charitable donation
If you wish to leave behind a cash gift to a charity or other organization upon your death, the payout from a permanent life insurance policy can do just that.
- You’re a business owner
The payout from a permanent life insurance policy can be used in a buyout agreement if one partner in a business dies and leaves their equity behind to a spouse or child. It can also help provide financial support to business partners if your passing away puts the business at risk.
- You have a special needs child
A child with special needs can require a lifetime of caregiving. A permanent life insurance policy payout can help provide financial protection for their long-term needs after you’re gone.
- You want to leave behind an inheritance but may not have much to give
If you would like to leave a gift to your children, grandchildren or anyone else after you paw away but you’re worried you may not have much money to give, a permanent life insurance policy can be one way to ensure you leave behind a level of financial help to the ones you love.
- You come from a family with health issues
Some permanent life insurance policies include optional riders that can be added over time. If there are health issues that run in your family, these riders could potentially accelerate your death benefits, waive your premiums, purchase additional coverage and more, depending on your specific plan and your health situation.
The Benefits of Permanent Life Insurance
Is permanent life insurance right for you? If you like the idea of having a guaranteed payout and the ability to access potential cash savings, then this type of life insurance policy could be what you’re looking for.
A permanent policy's cash value can be used to pay premiums, or may be accessed via loans or withdrawals. Policy loans and withdrawals will reduce cash values and death benefits, and may cause the policy to lapse. Additional premium payments may be required to keep the policy in force. Withdrawals may be subject to a surrender charge. Withdrawals and any unpaid loans are subject to ordinary income tax and, if taken prior to 59 1/2, a 10% federal additional tax.