What is permanent life insurance?

Unlike term life insurance, permanent life insurance is a type of life insurance that doesn’t come with a predetermined end date. Types of permanent life insurance include whole life insurance and universal life insurance. Permanent life insurance lasts your entire life as long as premiums are paid. Some people use a type of permanent life insurance called Life Insurance Retirement Plans (LIRPs) to help pay for retirement. Permanent life insurance isn’t the most affordable option, but it can make sense in certain situations. For example, it’s a good option if you want to leave behind an inheritance or you want to borrow against your life insurance policy like a savings account.

Permanent life insurance costs more.

Permanent life insurance is the more expensive option for coverage by up to 10 times as much. The fact that it lasts for your entire life, means that the insurer takes on more risk, and therefore costs can be higher. In addition, permanent life insurance comes with a fixed rate, so you pay the same period despite getting older. If you were to purchase a term life insurance policy and it expires, your premiums would go up significantly depending on your age when you tried to renew or extend your policy.

What are the advantages of permanent life insurance?

There are multiple advantages to purchasing permanent life insurance coverage.

It lasts your lifetime. You don’t have to worry about having to convert a term life insurance policy when time runs out at a higher monthly premium.

You will have steady payments. When you purchase permanent life insurance, your premium stays the same for the rest of your life. If you purchase your plan when you are young and healthy, you can save.

You will have a cash resource. Permanent life insurance has a cash value that grows at a certain rate each time you make a premium payment. You can cancel your policy for the cash value once it reaches a certain amount.

It helps with estate planning and retirement. Since the cash value grows tax-deferred like retirement accounts, this type of life insurance is good for these purposes. You can even withdraw cash from your policy to help supplement your income when you retire.

You can provide an inheritance. You can provide an inheritance that is tax-free for your designated beneficiaries.

Things to know about permanent life insurance

While permanent life insurance has many advantages, there are also drawbacks.

You will pay higher premiums. You can expect to spend 10 to 12 times more for a permanent life insurance policy than a term life insurance policy, because they last a lifetime.

They are more complex. Purchasing a permanent life insurance policy requires more research than a term life policy due to the way premiums are set, how cash values are determined, and more.

Penalty for defaulting. If you borrow against your life insurance policy and pass away before paying it back, that amount will be deducted from the benefit that would be paid to your beneficiaries.

The value could go down. Certain economic conditions can reduce the value of your permanent life insurance policy. As a result, you might not be able to borrow as much or your death benefit would be lower.

Is permanent life insurance for me?

Permanent life insurance may be for you if you want to maximize your pension, you are a high-earner or have a high net worth, you want to provide an inheritance, you want to provide for one or more family members. Check your rate at Insurance Best Prices today and determine if permanent life insurance is the right policy for you.