Life insurance is crucial for helping your loved ones to avoid a financial burden after you pass, yet nearly half of Americans don't carry any form of life insurance at all. In order to best set your family up for success when you're no longer around, it's extremely helpful to look into getting the right life insurance policy for your needs.
An independent insurance agent can advise about permanent life insurance and any additional life insurance options. They’ll get offers from top life insurance providers and sort through multiple proposals to help find your best choice. But before we jump too far ahead, here's a closer look at this important coverage.
What Is Permanent Life Insurance?
Unlike term life insurance, which lasts for a set number of years, permanent life insurance essentially lasts as long as you live. In addition to a longer expiration date, permanent life insurance has different coverage options than term life insurance.
Permanent life insurance policies have a cash value feature that accumulates over time, similar to a savings account. In some cases, you can even borrow money against the amount you’ve saved.
Permanent life insurance can come in a variety of policy types, but the two most common are:
- Whole life insurance:
- Tax-deferred death benefits: Your death benefit is the coverage amount selected to be available upon your death to the beneficiary, or the person who inherits your policy's payout. These benefits are tax-deferred for a later time.
- Level premiums for the policy’s life: Premiums remain stable and the same price throughout the life of the policy.
- Cash value accumulation: With a whole life policy, you'll have a cash value feature that depending on your policy type can be borrowed against. The cash value will accumulate over time, regardless of the company's investment performance.
- Universal life insurance:
- Tax-deferred death benefits: Similar to in whole life insurance.
- Flexibility to customize your coverage: Universal life insurance offers flexible death benefits that can be adjusted within a coverage limit.
- Options for tailoring your premiums: This life insurance type offers flexible premiums that fit inside your budget.
- Cash value accumulation: You can earn higher interest when rates are high and a guaranteed minimum when they are lower.
An independent insurance agent can help you select the right kind of permanent life insurance for you.
What Does Permanent Life Insurance Cover?
Permanent life insurance provides a death benefit amount preselected by you and assigned to a beneficiary of your choosing. This death benefit will become available upon your death. Unlike other insurance policies that provide coverage for situational claims, life insurance only provides coverage for your passing.
What Doesn't Permanent Life Insurance Cover?
Life insurance policies often come with two major exclusions. What’s unique about life insurance is that these exclusions are only in effect for a period of two years, after which they expire.
Permanent life insurance policies usually exclude the following:
- Contestability clause: States that if an applicant lied to the insurance company about a health issue or lifestyle choice that leads to their death, the insurer will not pay out the death benefit. However, the insurance company will refund the cost of the policy.
- Suicide clause: States that if the policyholder commits suicide within two years of purchasing their coverage, the insurance company will refund the cost of the policy, but not pay out the death benefit.
Regardless of the time limits for life insurance exclusion clauses, it’s never a good idea to lie or otherwise omit honest data when applying for coverage. Beyond being dishonest, you run the risk of your coverage becoming invalidated, so it’s best to just be truthful up front.
Who Sells Permanent Life Insurance?
Permanent life insurance is available from many different insurance companies, and the best way to find the right carrier for you is through working with an independent insurance agent. Independent insurance agents know which carriers to recommend to meet your needs, and can provide informed suggestions based on company reliability, rates, and more.
While many insurance companies could provide permanent life insurance for you, finding coverage could also depend on the area you live in. Here are a few of our top picks for permanent life insurance.
|Top Permanent Life Insurance Companies||Star Rating|
One permanent life insurance company outshines its competitors.
- Best overall permanent life insurance company: Nationwide
Permanent life insurance from Nationwide has the following benefits, as listed on their official website:
- Tax-free death benefits: The beneficiary of a permanent life policy receives a guaranteed death benefit when the policyholder passes away. In most cases, it's tax free.
- Build cash value: A permanent life insurance policy can build “cash value” that policyholders can withdraw during their lifetime.
- Provide financial stability: If your spouse or children depend on your income, permanent life insurance can provide financial support when you’re gone.
- Focus on the long term: Permanent life insurance is intended to last a lifetime. The premium generally stays the same and you get peace of mind knowing that family is taken care of even if the breadwinner passes away.
- Safeguard your inheritance: Those wanting to leave their heirs an inheritance can use permanent life insurance to pass down money to the next generation.
- Insurance is guaranteed for life: Once your policy is active, and if you pay your required premiums on time, the insurance policy will remain in force for your lifetime.
- Reap rewards: Some permanent life insurance options pay the owner dividends, which can be taken as cash, applied to your premium, saved to gather interest or used to buy more insurance.
- Safe investment option: Many permanent life insurance policies offer a guaranteed interest rate on the “cash value” that builds up.
- Affordable premiums: Buying permanent life insurance when you’re young offers affordable premiums that can stay with you throughout your lifetime.
An independent insurance agent can help you determine if Nationwide's permanent life insurance is right for you.
Permanent Life Insurance Death Benefit Options
There are a couple of death benefit options under permanent life insurance, known as level or increasing. These can be broken down as follows:
- Level: The death benefit levels the face amount of your policy, meaning that after you pass, your chosen beneficiary will receive a level payout.
- Increasing: The death benefit equals the face amount of your policy, with your policy's cash account value added on top. Your beneficiary would receive both the death benefit and your account's accumulation.
If you're unsure of which death benefit option is right for you, an independent insurance agent can help you decide.
What Is a Long-Term Care Rider?
A long-term care rider can be added to a permanent life insurance policy to accelerate the death benefit if the policyholder becomes chronically ill. The accelerated death benefit can be used to help pay for ongoing medical care. An independent insurance agent can help provide more information about long-term care riders for permanent life insurance.
Term vs. Permanent Life Insurance
There are major differences between permanent and term life insurance, but each form of coverage also offers its own benefits.
The main differences between term and permanent life insurance are:
- Term life insurance: Covers the policyholder for a specified length of time, such as five or 10 years. The death benefit is only paid out to the beneficiary if the policyholder dies during the set term.
- Permanent life insurance: Covers you for your whole life and pays out the death benefit when you pass. These policies also accrue a cash value savings account over time that you can borrow against.
Permanent life insurance has pros and cons:
- Pro: Permanent life insurance is the best coverage if you want to be sure the death benefit will be paid out regardless of when you pass. This is helpful for people with children or other longterm dependents.
- Con: Whole life insurance can be as much as 10 to 18 times more expensive than a 20-year term life insurance policy. In turn, you might not be able to purchase as much coverage as you'd like.
- Con: Permanent life insurance can be an expensive, complicated way to save for retirement. The cost of these policies can also drag down your investment performance, so you might want to look into several options before considering permanent life insurance.
An independent insurance agent can further explain the differences between permanent and term life insurance, and the pros and cons of each.
Who Needs Permanent Life Insurance?
Anyone who wants a guarantee that their death benefit will be paid out to a beneficiary regardless of when they die. Folks with longterm dependents like children often choose permanent life policies.
Many policyholders with spouses also select permanent life insurance to help fund their cost of living in the future. Others still opt for permanent life insurance to guarantee an inheritance will go to a selected heir or organization.
Build Up Other Retirement Accounts First
It's highly recommended that you build an IRA or Roth or traditional 401(k) account before relying on a life insurance policy. A good practice is to only buy a whole life insurance policy if you'll still have plenty of money leftover after your IRA or other retirement accounts are maxed out.
Comparing Life Permanent Insurance Types
When shopping for life insurance, it's important to understand all the types available. Even permanent life insurance comes in many forms. The main differences in these coverages involve how cash accumulates over time and how the premiums are paid.
|Permanent Life Policy||Premiums||Cash Value Growth|
|Whole Life Insurance||Remains level throughout the life of the policy.||Continues to grow at a guaranteed rate over time.|
|Universal Life Insurance||Can be paid by using the policy's cash value. Maximum and minimum premiums are set.||Market performance impacts growth, but a guaranteed minimum return is awarded every year.|
|Variable Life Insurance||Can vary or be level, depending on policy.||Policyholder has the option to choose how the cash value will be invested from a list.|
|Indexed Universal Life Insurance||Can be paid by using the policy's cash value. Maximum and minimum premiums are set.||The performance of the index impacts growth, but annual returns have caps. A guaranteed minimum return still happens every year.|
|Variable Universal Life Insurance||Can be paid by using the policy's cash value. Maximum and minimum premiums are set.||You choose how to invest the cash value from a set of options which are similar to mutual funds|
|Guaranteed Universal Life Insurance||Remains level throughout the life of the policy.||Often there is little cash value, or no cash value.|
Since permanent life insurance never expires, many policyholders select this form of coverage. In fact, a recent study found that 51% of life insurance carriers had permanent life insurance, while only 33% had term life insurance, despite the lower cost.
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How Much Does Permanent Life Insurance Cost?
There are three major factors that go into the cost of your permanent life insurance policy:
- How much coverage you need
- Your age
- Your location
- Your health history
A permanent life insurance policy is less expensive when you are young and healthy. The lower premiums will go up the older you get. With a whole life permanent policy product, your premiums can be “locked in” and will remain the same for the entirety of the policy.
With a universal life policy, the premiums can be altered and is part of the flexible nature of a universal plan. An independent insurance agent can help find exact quotes for permanent life insurance in your area.
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Permanent Life Insurance FAQ
Permanent life insurance is a form of life insurance that follows you your whole life. Your selected beneficiary will receive the death benefit payout after you pass. Permanent life policies also accrue a cash value over time.
Permanent life insurance provides life insurance coverage with no set term. It's set up to pay out a large sum of money to a person or entity of your choosing after you die.
Term life insurance only covers you for a set number of years, such as five or 10. Term life insurance's death benefit will only be paid out if you die within the chosen term, unlike permanent life insurance. Permanent life insurance also accrues a cash value over time, unlike term life insurance.
More than half of all life insurance carriers have a permanent life insurance policy. That's because permanent life insurance doesn't expire, and therefore makes the most sense for a vast majority of people.
The Benefits of an Independent Insurance Agent
When it comes to helping insurance customers find the absolute best permanent life coverage, no one’s better equipped to help than an independent insurance agent. Independent insurance agents search through multiple carriers to find providers who sell permanent life insurance, deliver quotes from a number of different sources and help you walk through them all to find the best blend of coverage and cost.
TrustedChoice.com Article | Reviewed by Paul Martin
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