Permanent Life Insurance
What Is Permanent Life Insurance?
Permanent life insurance is a type of life insurance policy that can provide a death benefit and a savings portion.
Both whole life and universal life insurance are primary types of policies. With regard to coverage, whole life insurance has a guaranteed lifetime benefit.
Understanding Permanent Life Insurance
Unlike term life insurance, permanent life policies lasts for the insured's lifetime. They can be renewed at any time without causing the policy to lapse. The policy's cash value can be used to fund various expenses, such as paying for a child's college education.
When buying a permanent life insurance policy, it is usually not allowed to borrow against the savings portion. This means that the policy will terminate if the loan amount exceeds the policy's cash value.
Permanent life insurance policies are tax-deferred. They allow the policyholder to keep the policy active and avoid paying taxes on earnings.
Money can be withdrawn from the policy without being taxed as long as the policy's limits are followed. Generally, withdrawals of up to the sum of the policy's premium are tax-free.
Before buying a permanent life insurance policy, it's important to thoroughly research the firms that offer it.
Permanent Life Insurance vs. Term Life Insurance
Although term life insurance is cheaper than permanent life insurance, it usually comes with a long expiration date.
Some people may find that they don't want to pay off their debts and other financial obligations while still accruing enough savings to pay for a new permanent policy.
This scenario is often the reason why many term life insurance policies have the option to convert to a permanent policy. This feature can be used by people with special medical conditions that usually require follow-up examinations.
While the premiums for a permanent life insurance policy are higher, many people can afford them due to their savings.
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