Life Insurance that Lasts Forever.
Today, there are many different types of life insurance policies to choose from. However, there are still really just two primary categories of life insurance coverage – these include term and permanent life insurance.
Permanent insurance policies provide both death benefit protection, along with a cash value component. This cash value portion of the policy allows the policy holder to build up savings over time in a tax advantaged manner. All of the gains on the cash are tax deferred, which means that no tax is due until the time of withdrawal.
These funds are allowed to be borrowed or withdrawn for any purpose – including paying off debts, funding a child or grandchild’s college education, supplementing retirement income, or even taking a long-awaited vacation.
What is Permanent Life Insurance?
A Permanent insurance policy offers both a death benefit and a cash value component as part of the overall policy. This type of life insurance coverage is usually intended to last for the remainder of the policy holder’s life – and because of that, coverage will not expire, provided that the premiums remain paid.
The cash that is inside of a permanent policy is allowed to grow on a tax-deferred basis. This means that no taxes are due on the growth of these funds until the time that they are withdrawn. This could be many years in the future – if ever – and therefore, the funds have the opportunity to grow and compound exponentially over time.
The policy holder is allowed to either withdraw or borrow the funds that are in the cash value component for any reason – including the payoff of debt, supplementing retirement income, or even purchasing a second home.
While these funds are not required to be paid back, it is important to note that any amount of unpaid balance that remains at the time of the insured’s death will be charged against the death benefit that is paid out to the policy’s beneficiary.
There Are Two Different Types of Permanent Life Insurance Policies. These Include.
Term versus Permanent Insurance.
Permanent life insurance differs a great deal from term life insurance in that term life provides death benefit protection only, without any type of cash value or savings build up. In addition, term life insurance is sold for certain time limits, or “terms.”
These can be for 5 years, 10 years, 20 years, or even 30 years. There is also an annual renewable term life insurance that is sold for one year increments. Each time a term life insurance policy expires, the insured will typically have to re-qualify for coverage if he or she wishes to continue being covered.
If they do qualify for a new term life insurance policy, the new premium rate is likely to be higher, due to the insured’s then-current older age. For those who are young and in good health, however, term life insurance can provide a good way to obtain a large amount of life insurance protection at a relatively low premium rate.
Advantages of Permanent Life Insurance.
There are other advantages to owning a permanent life insurance policy, too, such as the premium being locked in. This means that once a policy has been purchased, the amount of the premium paid will typically remain the same throughout the entire life of the plan – regardless of the increasing age, or any change in health of the insured.
- Guaranteed Death Benefit
- Guaranteed Premiums
- Permanent Coverage Never Expires
- Cash Value Build-Up
- Tax-deferred Savings