Permanent Life Insurance Permanent Life Insurance does not have a time limit, as does Term Life insurance. In addition to remaining in effect as long as you pay your monthly premiums and keep any other obligations per your contract with the life insurance company,  these type of policies also accrue “cash value.” The most common type of Permanent Life insurance is Whole Life Insurance. Other types of Permanent Life insurance are Universal Life and Variable Life insurance.

Universal and Variable Life insurance give you a greater degree of flexibility. In both types of insurance you can adjust your premium and your death benefit. In Variable Life you are also empowered with investment decisions. But in both of these types of insurance, premiums, interest rates and even your death benefits can be subject to the whims of the markets. Variable Life insurance lets you elect to invest in stocks and publicly traded bonds. As such it is considered a securities product and the only type of life insurance sold by prospectus and regulated by the Securities and Exchange Commission. What is Permanent Life Insurance? Basically there are two types of life insurance, Term Life Insurance, which you buy for a fixed period of time, and permanent life insurance, which remains in effect until you die. In addition to not having a limited term, all types of Permanent Life insurance build cash value with some form of tax-deferred investment or savings plan. Because of this investment component,  the premiums are significantly higher than Term Life insurance premiums. The most common type is Whole Life insurance. There are two main variations of Whole Life insurance available. Universal Life Insurance and Variable Life Insurance. The differences between all three are related to the interest rates and how investment funds are allocated. All Permanent Life insurance plans build cash value. Over the life of the policy, you can borrow money against the accrued value. If the loan has not been paid back at the time of death, the amount of the loan will be deducted from the death benefit amount. On some policies the cash value increases to the point where monthly premiums become unnecessary, and the life insurance policy effectively “pays for itself”. As with any investment product, these type of policies have some degree of risk, and potential return on investments are not guaranteed. You should ask your life insurance agent for an illustration of how the policy would work over time as interest rates and other factors change. Permanent Life insurance is designed to remain in effect for your “whole life” – hence the name Whole Life insurance. Therefore it is best considered for individuals who believe they will have reason to rely on death benefits for their family no matter what age they are when they pass away. For example, parents who have disabled children, who will likely never be able to support themselves, should consider it. Also for people who expect to leave behind a considerable estate for their heirs, this type of policy can be used to pay off estate taxes. Things to consider about Permanent Life Insurance