Permanent life insurance provides coverage for the full lifetime of the insured person. While it is more expensive than term insurance, permanent policies combine a death benefit with a savings component that earns interest on a tax-deferred basis.<\/p>
The two primary types of permanent life insurance are whole life and universal life. The cash value of whole life insurance grows at a guaranteed rate. <\/p>
Universal life insurance also contains savings and a death benefit, but it features more flexible premium options and its earnings are based on market interest rates. Variable life and variable universal life also provide expanded options to invest the cash value in mutual funds and other financial instruments.<\/p>
Life insurance is a contract between you and an insurance company. In exchange for your premium payments, the life insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death, as long as your policy is in force. If you have permanent life insurance, there may be a cash value component, too.<\/p>
Financial protection and peace of mind are at the forefront of life insurance. The best life insurance companies offer coverage options that help you ensure your loved ones will be financially taken care of if you die. Knowing your family will not face financial hardship when you\u2019re gone provides peace of mind.<\/p>
Life insurance beneficiaries can use the money paid out by a policy for whatever purpose they choose. Often this includes:<\/p>
Having the safety net of life insurance can ensure that your family can stay in their home and pay for their wants and needs.<\/p>
In addition, many life insurance policies include living benefits. This feature allows you to take money from your own death benefit while you\u2019re still living, but only in specific cases outlined in the policy. These can include cases where:<\/p>
You can use money from living benefits to pay for anything you like, such as medical bills not covered by health insurance or mortgage payments. When comparing life insurance vs. health insurance there are no similarities, but living benefits can pay health care costs.<\/p>
Life insurance works by providing your beneficiaries with a death benefit payout if you die, but only if your policy is in force when you pass away\u2014meaning you have paid the required premiums while you\u2019re alive. The death benefit can be used for any purpose your beneficiaries choose.<\/p>
Before you enter into a life insurance contract, the life insurance company will determine your required premiums. There are several factors that affect life insurance quotes, including:<\/p>
The younger and healthier you are, the better your quotes will be. Comparing life insurance quotes with several reputable companies is a great way to start finding the best coverage for a good price.<\/p>
There are two primary types of life insurance: term and permanent life:<\/p>
If you’re shopping for life insurance and decide to buy a permanent life policy, there are many types to choose from. Your decision will depend on how much risk you\u2019re comfortable with and how much flexibility you want.<\/p>
Whole life insurance policies have fixed premiums and a cash value component that (slowly) accumulates.<\/p>
Insurers may offer different payment schedules, such as paying premiums up to age 100, paying premiums for a fixed number of years (such as 10, 15 or 20 years while maintaining coverage after payments stop), and single-payment policies. When you die, your beneficiaries typically receive the face amount of the policy, not the face amount plus cash value. <\/p>
You can withdraw money or borrow against the cash value during your lifetime \u2014 just know that if you don’t pay it back, the insurer will reduce the death benefit by the same dollar amount.<\/p>
The main draw of universal life insurance is that it allows you to adjust your premiums and death benefit, giving you flexibility as your financial circumstances change. You can also combine the cash value with the death benefit to increase the payout to your beneficiaries. <\/p>
Indexed universal life insurance is a specific type of universal life insurance that\u2019s tied to a stock or bond index, like the S&P 500. It offers similar flexibility in premiums and death benefits as universal life, though the premiums will be more expensive if you choose this option.<\/p>
Variable life insurance offers policyholders the opportunity to put their cash value in investments of their choosing, which can make this type of coverage riskier than whole or universal life. You may have the option \u2014 similar to universal life \u2014 to include the cash value in the death benefit. <\/p>
Premiums are typically fixed, and returns on the cash value are not guaranteed.<\/p>
What do you get when you mash together variable life and universal life? You get variable universal life, or VUL, a type of life insurance with a lot of moving parts. The policy\u2019s underlying cash value is subject to the ups and downs of the investments you choose. You can adjust your premium payments and death benefit. <\/p>
However, this increased flexibility comes with risks. If your investment choices don\u2019t pan out the way you\u2019d hoped, you could end up owing money or even losing the coverage.<\/p>
There are more specific types of permanent life such as survivorship policies, which are a form of family life insurance. These policies insure two lives at once \u2014 typically spouses \u2014 and pay out when the second person dies.<\/p>
If you\u2019re looking at permanent life insurance for retirement or investment goals, discuss it along with other options with a fee-based life insurance advisor before making a decision.<\/p>
The cost of permanent life insurance can vary significantly among policy types. Here are sample rates for whole life and universal life policies, compared with term life. As you can see, permanent life insurance premiums are often significantly higher.<\/p>