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The Benefits And Drawbacks Of Permanent Life Insurance

Permanent Life Insurance (also known as Whole Life Insurance) lasts for your entire life and never expires. In addition, Permanent policies usually have an investment element, allowing you to invest and/or borrow money from the policy.

Permanent Insurance Basics

Like Term Insurance, Permanent Insurance will pay your family or other beneficiaries a certain amount of money if you should die (known as a “death benefit”). In addition to a death benefit, Permanent Insurance policies usually have a cash value (think of it like a savings account) that increases over time on a tax-deferred basis, which you can invest and borrow against. Loans taken out against the cash value of the policy are on a tax-free basis, but usually accumulate interest and reduce the death benefit.

Cashing Out A Permanent Policy

Permanent policies usually offer the ability to cash it in for the value amount, which grows over time. This can provide you with a chunk of cash when you need it, though you will no longer own the insurance.

Permanent Policy Premiums

The premiums you pay are usually on an annual basis and stay the same for the duration of the insurance without any increases. While the premiums for Permanent policies are higher than premiums for Term policies, the fact that Permanent policies include savings and investment options may make this option more appealing.

For help figuring out how much life insurance you need, see our article How Much Life Insurance Do You Need?

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