What is Permanent Life Insurance?
Permanent life insurance is best suited for individuals who have a long-term need for life insurance coverage and are looking for a policy that provides both a death benefit and a savings component.
This type of policy provides coverage for the entire lifetime of the insured individual as long as the premiums are paid. When you purchase a permanent life insurance policy, you pay a premium which is generally higher compared to that of term life.
Some the premium goes towards covering the cost of the death benefit, while the rest is invested into a cash value account.
This cash value grows over time and can be used to pay premiums or withdrawn as needed.
Permanent life policies typically have a guaranteed death benefit, meaning that the death benefit will be paid out to the named beneficiaries, regardless of the policy’s cash value at the time of the policyholder’s death.
Additionally, permanent life insurance policies often have an option for tax-free withdrawals or loans from the policy’s cash value.
Permanent Life Policies & Their Cash Values
Whole Life
This is your basic permanent insurance policy including a death benefit and a borrowable cash value.
This cash value grows at a rate set by the insurance company which is ideal for those seeking a stable investment with absolute guaranteed growth.
Universal Life
Universal policies offers wide flexibility on premium and benefit amounts for those looking to pay more or less based on their financial situation. Universal life provides more investment options for the cash value component, as the policyholder may be able to choose from a range of investments such as stocks, bonds, or mutual funds.
Indexed
Universal Life (IUL)
The cash value of an IUL is tied on the performance of market indices, such as S&P 500, bringing the possibility of much greater returns. IUL policies typically offer a guaranteed minimum interest rate, which provides a measure of stability for policyholders unlike standard universal life policies.