Permanent Life Insurance
Permanent life insurance is exactly what it proclaims, a type of permanent life policy that has no term or age limit. It does not expire. This policy remains in force unless the insured stops paying the premiums. Permanent life insurance is good for the estate planning reasons and the wealth protection. Actually, it is the best way to transfer wealth to your children. Permanent life insurance can offer many options and is most often bought with long-term goals in mind – estate planning and investment purposes.
The policy cannot be cancelled by the insurer for any reason except fraudulent application, and any such cancellation must occur within a period of time (usually two years) defined by law. A permanent insurance policy accumulates a cash value, reducing the risk to which the insurance company is exposed, and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70-year-old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
Life insurance won’t keep people from dying, but it will keep their plans from dying with them. (Carlos Banhelyi)
Permanent Life Insurance Is Coverage for Your Entire Lifetime
Permanent life insurance covers insured persons for their lifetimes. With this type of coverage, you have the dual security of knowing that while your premiums will never change, in the event of your death, your beneficiaries will receive the policy benefit tax-free. Permanent insurance provides lifetime coverage as long as premiums are paid.
The main benefit of permanent life insurance is that it provides you with insurance coverage for as long as you live at the same guaranteed rates. Most life insurance companies offer benefits of up to $5,000,000, or up to $250,000 for the plans that do not require medical examinations and tests. Although application requirements differ from one insurance company to another, it is usually necessary for applicants to undergo a medical examination.
3 kinds of permanent life insurance:
- Term to 100 Life Insurance offers protection to age 100 and beyond, with premiums guaranteed not to increase. There is no cash value or savings element, making it generally less expensive than other permanent insurance.
- Whole Life Insurance premiums typically don’t change over the course of a policy and are payable until the death of insured, or for a specified number of years. Most whole life policies include a cash value that grows over time, similar to a tax-deferred savings account.
- Universal Life Insurance combines permanent protection with a tax-deferred investment account that pays the cost of life insurance coverage. The premiums, less expenses, go into a tax-deferred investment account.
You can use a permanent life insurance policy to ensure that your surviving spouse and dependent children have access to the funds they need to maintain their quality of life should you pass away. Your heirs can also use the benefits payable to them to help cover the capital gains tax on any assets you leave them in your will, for example, a cottage or other vacation home.