Permanent Life Insurance
Permanent life insurance offers protection that will last your entire life, rather than for a temporary period of time. In addition to life long protection, permanent life insurance offers living benefits that can help you during your lifetime. Unlike term insurance, permanent insurance is a value builder. Both guaranteed cash values and non-guaranteed cash values build up, tax deferred, over the years, and you can put them to work in a number of ways.
The Value of Permanent Life Insurance
Permanent life insurance is often the best long-term solution for many people.
The reasons:
- Permanent life insurance provides life-long insurance protection, provided premiums are paid, or in the case of some policies, provided the policy remains in force. With few exceptions, once you have been approved for the coverage, your policy cannot be canceled by the carrier. Regardless of your health, the insurance will remain in force.
- Despite higher initial premiums, permanent life insurance can actually be less expensive than term in the long run. Some permanent policies are eligible for dividends, if and when they are declared by the insurance company. Many companies offer the option to apply current and accumulated dividend values
towards payment of all or part of the premiums. So while premiums must be paid under both permanent and term insurance plans, the long-term out-ofpocket cost of permanent life insurance may be lower compared to the total cost for a term policy. - Permanent life insurance can eliminate the problem of future insurability. It does not expire after a certain period of time. It does not need to be renewed. Also, some policies contain guaranteed purchase options, which allow you to buy additional coverage at specified times, regardless of your health.
- Permanent life insurance builds cash value. This amount –– part of which is guaranteed under many policies –– can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide supplemental income for your retirement. Plus, if you stop paying premiums and surrender your policy, the guaranteed policy values are yours.
The True Cost of Term
Term insurance has its limitations. It isn’t appropriate for all people or under all circumstances. Among the factors you should be aware of:
- Purchasing term insurance is often compared to renting a house. When you rent, you get the full and immediate use of the house and all that goes with it, but only for as long as you continue paying rent. As soon as your lease expires, you must leave.
Likewise, term life insurance provides a death benefit only for a specific length of time. When the term coverage expires, so does your protection. Also, if you stop paying premiums, the coverage ends. - There is the very real danger of becoming uninsurable when the term coverage expires. While many term policies are convertible to permanent coverage, others may not be. Most of all, even if the coverage is
convertible, there are time limits. If the policy is allowed to expire, you may be required to reapply. If you are found to be uninsurable at that time, you will be without coverage. - Term insurance does not offer the many "living benefits" afforded by permanent life insurance. For example, permanent life insurance policies provide tax-deferred cash value accumulation that can be borrowed against or withdrawn to help fund almost any need.* Term insurance does not build cash value
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