A permanent life insurance policy is more expensive than its term policy counterpart but does offer advantages such as building a cash value, a desire to use the investment component, and needing protection without having to renew as with term insurance.
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Of course, there are different types of permanent life insurance that you will need to examine so you can choose the one that is best for your needs.
This has fixed premiums and builds up a cash value over time. This means that you can take a loan out against the policy. Plus, you get flexibility in paying the premiums which can last up to your 100th birthday, a set period of 10 to 20 years, or a single-time payment. Your beneficiaries will most likely receive the face value of the policy without the cash value added.
There are a few variations when it comes to whole life policies that you will want to examine before making your purchase.
Graded Benefit Whole Life Insurance: If you are plagued with health complications, a graded benefit policy allows you to have life insurance protection.
However, the benefit levels are graded so you only get your premiums plus a percentage for a pre-set time. Most benefits will kick in after two to four years depending on the policy that is purchased.
Modified Premium Whole Life Insurance: It is like traditional versions, but you can alter the premium payments during the first few years of the policy. This means that you pay less initially, but after that time expires, you will usually wind up paying a little more each month compared to traditional versions of whole life.
Here, you can place your premiums into an investment account that is managed by the insurance company. You can use the earnings towards paying premiums or adding to the benefit. However, all this will depend on your investment doing well as if it does poorly, you may find yourself paying more just to keep the benefit level up.
You have real flexibility with your premiums and the amount needed for your benefit. This means that you can skip some payments if needed, but there is a minimum level to maintain over the course of the year. So, as your life changes, so too the life insurance policy that also offers cash value.
Variable Universal Life: A combination of variable and universal, this is a policy with a lot going on. The cash value will depend on your investments, but you can send in premium money at any time if it falls within the rules.
Plus, you can choose your death benefit to be face value or have the cash value added. It’s complicated, but for many it does work.
There are various subsets found in all life insurance policies as insurance companies continue to tailor them to the needs of their customers. With a little effort, you can find the type of permanent life insurance policy that best fits your needs while staying within your budget.