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Permanent Life Insurance

Permanent Life Insurance

A permanent life insurance policy is bought for getting protection for the entire lifetime. And, there is an additional investment component that provides maximum amount of return on investment. The best part of permanent life insurance is that your necessary protection remains for ever, you need not to worry about when the term of the policy ends or make decisions about what will be your next plan to secure the protection of your family.

The different benefits of permanent lie insurance

As already mentioned, it is the longevity that makes permanent life insurance so special. Your policy remains as long as you are alive, as you earn value without needing your intervention. Along with this, you also get a constant premium which never increases over the lifetime of the policy.

Another important benefit of permanent life insurance is that you can build cash value with the investment component. That means, you can borrow against or withdraw for all your different expenses with the help of your policy. The expenses could be your child's college education, or money to provide more value to the beneficiaries when you are not there.

Normally, permanent life insurance policies provide cash value growth on a tax-deferred basis. This means, you do not require paying taxes on your policy's earnings, nor there is any need to pay taxes if money is withdrawn from the policy.

Shortcomings to permanent life insurance

The biggest drawback that holders of permanent life insurance face is its high cost compared to term life insurance. Your financial status may put a constraint to pay for the high premium of permanent life insurance. You may have to skimp and remain underinsured.

Another consideration that needs to be taken into care is to get the required approval and that involves a medical exam, different documentation forms, and the history of your health.

Finally, if you happen to take loans from the cash value that are unpaid at the time of your death, it will result in reduction of death benefit to the beneficiaries, who will receive smaller payout.

The different types of permanent life insurance

Permanent life insurance are of four types. These are:

  • Whole Life - here, the premium is the same all along the life of the policy; this type provides death benefit as well as savings account.
  • Universal Life - it is a flexible policy that provides you with the option to adjust the premiums as well as the death benefit.
  • Variable Life - it is a combination of insurance protection along with investments in bonds, stocks and money market funds.
  • Variable Universal Life - it is a combination of both the types of the policies.

It must be noted that permanent life insurance is right for people who:

  • Are looking for a long term insurance policy.
  • Are looking for a policy that provides cash value that could be used to fund education, retirement as well as different expenses.

Permanent life insurance policy is economical as the premiums paid over the life time remains same. However, it remains costly to many people. If a lower premium is sought, then term life insurance will be the right choice as the coverage is more affordable in protecting the family. If it is the investment part of permanent life insurance policy that you like, you can invest the saved money on a term life insurance policy for greater return.

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