What is a Permanent Life Insurance Policy?
A permanent life insurance policy is a type of life insurance that provides coverage for the policyholder's entire life, as long as premiums are paid. Unlike term life insurance, which only covers a specified period, permanent life insurance offers lifelong protection and typically includes a cash value component.
Key Features of Permanent Life Insurance
- Lifelong Coverage: Once purchased, the policy remains in effect for the insured's lifetime, ensuring beneficiaries receive a death benefit no matter when the insured passes away.
- Cash Value Accumulation: A portion of the premiums goes into a cash value account that grows over time. This value can be borrowed against or withdrawn, providing a financial resource during the policyholder's lifetime.
- Stable Premiums: Premiums for permanent life insurance are generally higher than term policies but tend to remain level throughout the policyholder's life, making budgeting easier.
Types of Permanent Life Insurance
There are several types of permanent life insurance, including whole life, universal life, and variable life insurance. Whole life provides fixed premiums and guaranteed cash value, while universal life offers more flexibility in premium payments and death benefits. Variable life allows policyholders to invest the cash value in various financial instruments, potentially increasing returns but also introducing more risk.
Overall, permanent life insurance serves as a financial tool for long-term planning, estate planning, and wealth transfer, making it a valuable option for individuals looking to provide for their loved ones and build cash value over time.