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Which Type of Permanent Life Insurance Do You Need?

Insurance that will last to the end of your life is called Permanent Life Insurance, sometimes called “cash-value” insurance because, as you pay your premiums, your policy grows in its cash value. Though permanent life is somewhat costlier than term life insurance, you can, with permanent, borrow against its cash value or cash it in altogether by canceling your policy. This means that permanent life is an investment; term life is not.

The various types of permanent life insurance and how they work are listed below:

Whole Life Insurance

With a whole life policy, you will pay a constant premium and, upon your death, it will pay a fixed amount to your beneficiary. With whole life, your cash value increases during your lifetime at a specific rate, which is guaranteed by the insurance company. This is the only type of permanent life insurance against which you cannot borrow money.

Variable Life Insurance

With a variable life policy, you will have a constant premium as well, but the benefit amount upon your death is dependent upon how well your investments do. You are in control of how your premiums are invested; if the investments do well, your benefit will be larger than if your investments do not fair so well.

Universal Life Insurance

Universal life has a flexible premium, as well as a death benefit that depends on how you much you are able to invest. With universal life insurance, however, the insurance company will control the investments and guarantee you a certain rate of return. The amount you pay in premiums each month is your choice.

Universal Variable Life Insurance

This type of life insurance, as is obvious by its name, combines the flexible premium of universal life with the investment choice of variable. You choose how much you will invest, as well as how it will be invested. The insurance company won’t guarantee the amount of your death benefit; it will depend on how much you pay each month, and upon your investment decisions.

Choosing the Best Permanent Life Insurance

• While variable and universal variable life can give you better returns, they do carry a higher risk.

• You will have flexible premiums if you choose either universal or universal variable life insurance.

• Whole life allows you to pay your premiums with the dividend payments after you’ve built up enough cash value.

Be sure to consult an agent who can provide you with quotes for each type of life insurance, as well as help you decide which kind will best suit your needs and provide your beneficiaries with the funds you’d like them to have upon your passing.