Permanent Life Insurance
In this world of uncertainty, people are relying more and more on long term methods to keep their money, and themselves, safe. One such method is to take out a permanent life insurance, perhaps in the form of an endowment or whole life insurance. Is this type of insurance for you? What is permanent life insurance?

Life insurance (or life assurance, as it is known in the United Kingdom) is, put simply, a financial package designed to protect those who depend upon you for monetary support. Remember that a life insurance policy is a legal contract. Within it are terms and conditions of the risks assumed. Any misrepresentation by the policy holder or the insured will be grounds for nullification of the insurance.

In the case of permanent life insurance, there are three important aspects to remember: the policy is for the life of the person insured; the payout is assured when the policy ends; and the policy accumulates (or accrues) cash value.

How does this compare with term life insurance?
A term life insurance is taken only for a short period, and payment to beneficiaries occurs only with the insured’s death. Term life insurance, moreover, does not accrue cash. Since permanent life insurance is for a longer term, however, this means that it will cost at least eight to ten times more than term insurance. Although expensive, permanent life insurance will allow the insured to take out a “policy loan” after a certain period of regular premium payments. You can think of permanent life insurance as a bank, where withdrawal can be done only after a specified period of time; term insurance, on the other hand, is more like gift-giving. Money is turned over to the beneficiary only after a special event has occurred.

Permanent life insurance may be divided into three categories: whole life, universal life, and endowment.

In whole life insurance, the policy holder pays a specified premium during a specified period of time. Premiums are often high, and are inflexible; that is, the amount you pay cannot be changed or adjusted according to your current income. Whole life insurance, however, has assured death benefits and cash value: aspects such as expense charges and mortality will not diminish the cash value that the policy promises.

The money accrued from whole life insurance, however, is low, and those who buy whole life insurance often purchase “riders.” These are extra insurance perks, such as insurance on accidental death, which can be obtained by paying additional premium.
Universal life insurance, on the other hand, is a new type of life insurance with the same coverage as whole life. However, premium payment values are not fixed, and the internal rate of return will most likely be higher. Universal life insurance also has more flexible death benefits.

Variable universal life insurance, like universal life insurance, has cash values attached to it. The two differ, however, in how the cash accounts are treated, and how the money will be taxed.

Limited pay life insurance is another kind of permanent insurance. In limited pay, the insured is given a certain period of time in which to pay the premium. After the time period elapses, a premium will no longer have to be paid, but the policy will still be in effect. A common limited pay life insurance type is the twenty year limited pay, which means that the policy holder will pay the premium for a period of twenty years, after which the policy matures. Yet another kind of limited pay life insurance is considered paid when the policy holder reaches the age of sixty five.

Another kind of permanent life insurance is the endowment. Endowments are policy packages that reach maturity (or endow) before a certain age. Payment of endowments is usually done annually, and payment is much, much higher than premium payment for whole life or universal life insurance. This is because the paying period is much, much shorter, and the policy maturity date comes earlier. An advantage to endowments, however, is the fact that the cash accrued can be withdrawn or loaned much quicker than other life insurance types.

Permanent life insurance is a great thing to have if you have many people depending on you for financial support, and if you have money to spare for the premium payments. If you think you need permanent life insurance, then consult with your insurance agent, or with someone who has purchased a permanent life insurance package. Life insurance, when chosen carefully, is a good investment for anyone who wants to build a secure future, whether for himself or herself, or for his or her children.