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Are you dipping your toes into the life insurance pool? Choosing to purchase life insurance is a big step — one that could provide your loved ones with lasting financial security for tomorrow. There are many options available. How do you find the right one for you? Exploring the available policy types could help you finally take the plunge.
Permanent life insurance policies are one popular option because they are designed to grow with you. Intrigued? Take a deeper dive into permanent life and learn more about the available options, how they work and when they could make sense.
Permanent Life Insurance
Permanent life insurance is designed to last your entire life. As long as you pay your premiums, your coverage stays in force. With permanent life insurance, you don't have to worry about your coverage ending. Some permanent life insurance policies also build cash value, which is money you could borrow against while you're still alive.1
Whole Life Insurance
Whole life insurance is the oldest and most straightforward version of permanent life insurance. The premiums on these policies never go up and stay the same as when you first bought your policy. The cash value grows at a guaranteed fixed rate, meaning you know how much you'll earn every year ahead of time.
Universal Life Insurance
Universal life insurance is another permanent life insurance option. Universal policies let you change your insurance premium, meaning some months you can pay more than others.2 Your cash value growth is based on market interest rates, so the amount you earn could change every year. Universal life policies generally have a little more risk than whole life policies, but universal life policies are often more flexible.
Is Permanent Life Insurance Right for You?
Permanent life insurance could make sense for insurance goals that never end. One example? You could allocate funds to pay for your final expenses. In the end, this is a need we all share. A permanent life insurance policy will help cover these costs — whether you live another 20 years or 100 years. Permanent life insurance could also help you leave an inheritance for your loved ones or give a donation to charity.
Your term life insurance is about to expire
Let's imagine that you bought a large term life insurance policy when your kids were young, but now it's about to expire. You could decide to buy a permanent policy. Depending on the amount you choose, it could be enough to cover your final expenses and leave a small inheritance for your children. Then, once your permanent policy is in place, your life insurance coverage will remain set for life, as long as you pay the premiums. Increases in coverage are subject to new underwriting.
Getting a permanent life insurance as a young person
For younger people, permanent life insurance could help you lock in a low rate for the rest of your life.
Starting a family someday
If you don't have children, but plan to start a family someday, permanent life insurance could be a good fit — as the policy would remain in place as your children grow, as long as you pay the premiums.
The Bottom Line
If you want a long-term solution for your insurance, permanent life insurance could be a good fit for your needs. Getting your feet wet in the world of life insurance might feel a little intimidating, but jumping in (and learning more about the ins and outs of each insurance type) could help you finally learn how to swim.
1 The policy would need to be funded properly to access the cash value. Keep in mind cash value may take years to accumulate, unless a large premium is paid up front. Withdrawals may be subject to charges, withdrawals of taxable amounts are subject to ordinary income tax, and, if taken before age 59½, may be subject to a 10% IRS penalty) and loans (e.g., interest is charged on loans, they may generate an income tax liability, reduce the Account Value and the Death Benefit, and may cause the policy to lapse. Please determine whether a withdrawal or loan is best for your situation.
2 There must be enough cash value in the policy to cover monthly charges if a lower premium is paid than the amount selected at issue or if a premium payment is skipped. Additional premium payments may need to be made to keep the policy in force. You may also need to consider paying enough into the policy to keep up with the insurance costs or your policy could expire.