(Newswire.net — December 18, 2021) —
Life insurance policies exist to provide your loved ones financial security in case you pass away unexpectedly. Broadly, there are two common types of life insurance: term life and permanent life. Term life insurance provides coverage that lasts for a specific time, like 20 years. Permanent life insurance, on the other hand, provides lifetime coverage and offers a few other benefits. Read on to learn what permanent life insurance is, what it covers, and some common types of policies that may be available to you.
What is permanent life insurance?
Permanent life insurance is a type of life insurance policy that provides you with lifelong coverage for your loved ones. Your insurer will pay out your death benefit — the income stream for your loved ones that your premiums pay for — no matter when you die.
Permanent policies also come with a cash value, which acts like a tax-deferred savings account you can borrow against at a low rate. Part of each premium payment goes into that cash value, which can grow over time.
There are no credit or income checks when you borrow against the cash value, and you can pay the loan back on your own schedule. As long as the outstanding principal and interest don’t grow larger than the remaining cash value, your policy will stay in effect. Many permanent policies also pay dividends you can take as cash, use to pay premiums, or reinvest into the cash value.
Common types of permanent life insurance
Here are a few types of permanent life insurance policies:
Whole life insurance
Whole life insurance, the most common type of permanent life policy, comes with a fixed death benefit. The cash value grows at a fixed interest rate.
Universal life insurance
Universal life insurance policies also come with a fixed interest rate on the cash value, but you can adjust certain items within the policy, such as the death benefits.
Variable life insurance
Variable life insurance policies let you invest your cash value in other investments, such as stocks or mutual funds. This exposes you to the risk of losing your money, but you also have the potential to grow your cash value faster if your investments increase in value.
The bottom line
There are a variety of permanent life insurance policies out there, but they all have one thing in common: lifelong coverage for your loved ones, regardless of when you die, and a savings portion that rewards you for having that policy. People that need this coverage, such as those with a young family that want them to be taken care of and seniors who want to cover end-of-life expenses, may benefit most from a permanent policy. That said, make sure you evaluate your situation and goals before applying for a life insurance plan. If you decide you need permanent life insurance, invest time researching and shopping around for a plan that fits your needs.