Permanent Life Insurance
Nearly half of Americans do not have any form of life insurance. When you realize how vital a life insurance policy could be to your beneficiaries and loved ones still remaining, this seems low.
A life insurance policy can aid in paying off any remaining debt such as a mortgage payment, student loans and allow your loved ones to continue without the financial burden that may be associated with your passing.
What Is Permanent Life Insurance?
Unlike term life insurance, which lasts for a predetermined number of years, permanent life insurance lasts as long as you do. In addition to a longer expiration date, permanent life insurance has different coverage options than term life insurance.
Permanent life insurance policies have a cash value accumulation feature that grows over time, similar to a savings account or money market account. In some cases, you can even borrow money against the amount you’ve accumulated.
Why You Should Buy Permanent Life Insurance
First, if you obtain a permanent life insurance policy when you’re young and healthy, the premiums are significantly lower. With the added benefit of a permanent life policy lasting for the length of your lifespan, it is a coverage that should be bought sooner rather than later.
Second, with the cash value accumulation, you can watch the value grow. With this benefit, you can keep the cash value intact, borrow against it or surrender the value and cash it out entirely ending the policy.
The cash value is tax-deferred until you withdraw funds. If you take out a loan against the funds or borrow against it, then the value is non-taxable. This also applies when the death benefit is paid out.
Types of Permanent Life Insurance
- Tax-deferred death benefits: your death benefit is the coverage amount selected and will be available upon your death to the beneficiary prechosen. These benefits are tax-deferred for a later time.
- Level premiums for the policy’s life: premiums remain stable and the same price throughout the life of the policy.
- Cash value accumulation: with a whole life policy you will have a cash value feature that depending on your policy type can be borrowed against. The cash value will accumulate over time and grow regardless of the company’s investment performance.
- Tax-deferred death benefits: again, your death benefit is the coverage amount selected and will be available upon your death to the beneficiary prechosen. These benefits are tax-deferred for a later time.
- Flexibility to customize your coverage: universal life insurance offers flexible death benefits that can be adjusted within a coverage limit.
- Options for tailoring your premiums: this policy type offers flexible premiums that fit inside your budget.
- Cash value accumulation: you can earn higher interest when rates are high and a guaranteed minimum when they are lower.