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How Does Permanent Life Insurance Work?

Life Insurance: Permanent, Whole, and Universal Life Insurance

While life insurance can be separated into two broad categories, Permanent life insurance and Term life insurance, Permanent insurance being the more complex of the two, can be further broken down into four additional policy types. These include Whole Life, Universal Life, Index Life, and Variable Life Insurance. These Permanent life insurance policies are also known as Cash Value Insurance. In short, Permanent insurance is basically a term insurance policy with an investment component stitched in. It is this investment component that is known as the cash value.  Since each of these has different features and benefits’, choosing which type of policy is best will mostly depend on your risk tolerance and future goals. At Advisors Insurance Direct, we will help you in determining which options will work best. Call when you’re ready to arrange a time to speak with an expert and to get your life insurance quote.

Deciding the Best Type of Permanent Life Insurance

Because each individual’s needs are unique, this array of policy types have been created. Life insurance is an important investment into the future of those individuals or entities that will suffer from a loss upon your death. Therefore, it is important that this decision be carefully analyzed before moving forward. Consumers need to ensure that they understand all the intricacies of these policies and that the future payment of the death proceeds will completely satisfy the problem for which this policy was acquired. It is for this reason that we highly recommended you work with an educated advisor to help you understand your needs and the terms of your policy when making a decision.

Whole Life Insurance

A whole life policy is a type of permanent insurance that combines pure life insurance with an investment fund known as the cash value. If a claim is made on a whole life policy, the beneficiaries receive a fixed amount at the time of death. This figure is stated at the outset. A portion of the premium each month goes towards building up the cash value based on investments made by the insurance company. The cash value has a tax-deferred status, which means that you can borrow money from the fund without paying taxes on the amount borrowed. Another of the advantages of this type of life insurance is the fact that the premium never changes throughout the life of the policy.

Universal Life Insurance

This is another type of permanent life insurance that combines pure insurance with an investment fund. Universal life policies are designed based on certain performance assumptions. Therefore, the premiums and death benefits can change based on actual performance of the investment fund. These policies typically have more favorable access to the cash value if needed.

Index Life Insurance

Index life insurance is similar to universal life; however, the cash value performance in this type of policy is connected to one or more of the market indexes. Typically, the S&P 500 is the most popular choice. These life insurance policies are often issued with a maximum amount that can be credited to the cash value, as well as minimum floor rate.

Second-to-Die Insurance

This is a policy which was originally designed for the purpose of creating liquidity for a family upon the death of the second spouse.  Where most insurance policies are written on the life of one person, this policy insures both.  The difference is that the death proceeds will not be paid out to the beneficiaries until both parents have died. Since wealthy families estate taxes are not usually due until the death of the second spouse, this type of insurance works well to provide the needed cash for the payment of these taxes.

Permanent Life Insurance: Whole and Universal Life Insurance

Learn More about Permanent Life Insurance

When investing in permanent life insurance, this is not a decision that you should take lightly. You will need to carefully determine whether permanent coverage is the right choice for you based on your circumstances. In order to make the best decision, you should work with someone who has the experience in working with all types of life insurance.

To learn more and to discuss the options available to you, contact us at Advisors Insurance Direct today. You can also call or contact us online for a customized life insurance quote.

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