Permanent Life Insurance

Permanent insurance is intended to stay in force until the insured’s death. It usually offers a fixed premium, generally accumulates a cash value on a tax-deferred basis and may also pay dividends. Permanent life insurance costs more than term insurance in the short run, however, it is generally more cost effective over the long term.

Common types include whole life, variable life, universal life, and survivorship life insurance. If insured died while the policy was is force, his/her beneficiary would receive an amount equal to the current value of the policy.

Whole life insurance provides a guaranteed death benefit in exchange for guaranteed premiums, which could be level, or may either increase or decrease over time. Portion of the premium covers the insurance (pure protection), while the balance grows tax-deferred. With certain limitations, insured may also borrow against or withdraw from the balance.

Universal life insurance is more flexible and can change with your needs changing. Premiums are deposited into an interest-earning account managed by the insurance company. Monthly deductions are made from the account to pay for insurance and administration fees. Insured has the flexibility of making consistent payments on a regular basis or less frequent larger payments—whichever works better—as long as there are sufficient funds in the account to cover monthly charges.

Variable universal life insurance also combines death benefit protection with the opportunity to invest. However, unlike traditional universal life insurance, variable policy offers the flexibility to invest net premium dollars in a broad range of investment options (normally mutual funds, not individual stocks), so you can customize your policy based on your individual preferences and financial planning requirements.

Survivorship life insurance protects two lives, instead of one. Married couples often choose this type of protection for estate preservation purposes. When insured dies, insured’s estate will pass on to the spouse free of Federal estate taxes (within certain limits). However, when spouse dies, the heirs will likely be subject to pay estate taxes. Survivorship insurance can provide the funds to offset these costs and can also protect your estate from being liquidated.

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