Define Permanent Life Insurance

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Permanent Life Insurance Defined

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If you want lifelong protection, permanent life insurance is the coverage you want. As long as you pay the premiums, the death benefit will be paid. Permanent life insurance policies are designed and priced for you to keep over a long period of time. If you don't need to keep the policy for the long term, consider term life insurance.

Permanent llife insurance policies are known by a variety of names: ordinary life, whole life insurance, universal life insurance, adjustable and variable life.

Most permanent life insurance policies have a feature known as "cash value" or "cash surrender value." This feature, not found in most term insurance policies, provides you with some options.

Permanent Life Insurance Advantages

As long as the premiums are paid, protection is guaranteed for life.
Premium costs can be fixed or flexible to meet personal financial needs.
A permanent life insurance policy accumulates a cash value against which you can borrow. (loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.) you can borrow against the policy's cash value to pay premiums or use the cash value to provide paid-up insurance.
A permanent life insurance policy's cash value can be surrendered -- in total or in part -- for cash or converted into an annuity. (an annuity is an insurance product that provides an income for a person's lifetime or a specified period.)
A provision or "rider" can be added to a permanent life insurance policy that gives you the option to purchase additional permanent insurance without taking a medical exam or having to furnish evidence of insurability.

Permanent Life Insurance Disadvantages

Required premium levels may make it hard to buy enough protection.
Permanent life insurance may be more costly than term insurance if you don't keep it long enough.

Types of Permanent Life Insurance

Whole life or ordinary life at one time was the most common type of permanent life insurance sold. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.

Universal life insurance or adjustable life allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums or maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy. (to increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.)

Variable life provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward -- stocks, bonds, combinations of both, or accounts that guarantee interest and principal. You will receive a prospectus in conjunction with the sale of this product.

The cash value of a variable life policy is not guaranteed and the policyholder bears the risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. If the specified investments perform poorly, cash values and benefits will drop.