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What is permanent life insurance?

What is permanent life insurance?

Death is the most certain thing there is to all humans, and protecting and catering for loved ones after the grim reaper has come calling is a concern for most. This is where life insurance steps in. There are several forms of life insurance. One of which is permanent life insurance.

Permanent life insurance, simply put, is a life insurance policy that doesn’t have a lapse or expiry date. This means that the policy lasts for the entire duration of the holder’s lifespan, provided that the premiums are paid. It also has the added advantage of a “Cash Value account” included in the policy. 

What is a Cash Value Account?

Every time you pay your premium, a portion of the cash goes into a cash-value account that builds up at a rate usually pre-specified by the policy. When you’ve built up the account to a specific amount, you would be able to take a loan against the value or sometimes even outrightly withdraw it if needed to cater for emergencies and rainy days.

There are various types of permanent insurance, each with its specific characteristics and advantages. These include;

Whole Life Insurance

This is one of the most popular insurance policies. It is typically an insurance policy that covers the policyholder for the duration of their life as long as the premium is maintained. It has a specific or fixed payment that yields a fixed percentage of cash value and covers the holder for the rest of their life.

It is a very simple, straightforward plan that does;t change much as the years wear on, and it also gives the holder a guaranteed cash-value account.

Universal life insurance

This insurance is similar to whole life as it also covers the holder’s entire lifespan and allows the holder to accumulate cash value. The difference lies in the fact that the net cost over time is lower than that of the whole life plan. It also offers flexibility that the whole life plan doesn’t, as you can vary the number of years covered and the cost of the premium from year to year.

You can also choose to add the accumulated cash value to the death benefit payout to your beneficiaries, thereby substantially increasing the total amount they receive after your demise.

Variable Life Insurance

This plan is one where your cash value is built on investments held by your insurance provider or on the stock market. The cash value built from these investments can be put towards your premium or the death benefit paid to your beneficiaries. With assets that are doing very well, you can build up higher cash value than you would have with the whole life plan. 

However, the con is that it’s a gamble. If you bet on the wrong horse and choose an investment that does poorly, you would not have much cash value to put towards your premium or your death benefit. 

Variable Universal Life Insurance

This is permanent life insurance with many options. You can choose to change several variables such as; the chosen investments, the premium, the amount of coverage, and the death benefit. This allows for more flexibility as you can adjust your policy according to the changes in your finances. However, it tends to be a tad more expensive.

Some life insurance policies are also categorized by the premium payment, like the Single-Payment Life Insurance. In this insurance plan, you can pay the entire premium at a go and not worry about meeting up premium payment monthly. However, the premium payment can be quite expensive, ranging from $5000 up to $100,000.

Survivorship Life Insurance

Also known as “Second to die,” is an insurance policy that covers couples and is paid out only after the death of the second individual in the coverage. This means that after the death of the first partner, the second is required to keep paying the premium on the policy till their death, after which the benefits would be released to their beneficiaries.

This is a premium usually taken out by parents to provide for their children in the event that they are orphaned.

Death isn’t something many people look forward to, and frankly, it can be pretty scary to think about. However, knowing that you have made provision for your loved ones to be cared for after you’re gone can take a little bit of the edge off. Permanent life plans are a good choice as no one knows when the old friend with the cold hands would come knocking, and the plans cover you from the moment you sign up until that august visit. Well, as long as you keep up the premium.

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