Permanent life insurance is insurance coverage that you will have for your lifetime. Permanent life insurance is necessary when people want to have coverage for their older years because people who have term insurance during their younger years find that they still need some coverage during their older years and now their term insurance has either expired or has become too expensive.
Permanent insurance is a form of life insurance that everyone should have. The reason is because you don’t know when you’ll pass away but having some permanent coverage in force you will know that your beneficiaries will be paid a benefit at some point in time. With term insurance you have to die in during that term time frame. So for example, if you had a 20 year term policy, you would need to die within the 20 years to have the benefit paid out. This is not taking into account renewing the policy and paying a higher premium at your attained age. Plus, you could end up paying more for term insurance over the long haul than just starting out with whole life from the beginning.
There are different types of permanent insurance. Whole Life, Universal Life, and Variable Universal Life. Each type of policy has its advantages. Whole Life requires you to pay premiums for your lifetime to keep the policy in force. Certain companies offer whole life policies which you can choose how long you’d like to pay for. For example with New York Life when you apply for coverage if you’d like to design your policy so that you will be guaranteed to stop paying premiums before retirement or until age 55, then you can do so. The coverage will still be in force and you don’t have to pay premiums.
With any permanent insurance policy, there is cash value that accumulates internally. So, each time you pay your premium, part of your premium covers the cost of your insurance coverage and a portion goes to building your cash value. Whole Life policies accumulate based on the company’s performance, while universal life policies accumulate on the interest rate, and variable universal life policies accumulate based on the market funds that you have chosen. Variable universal life’s cash value fluctuates with the market. That’s why you need to consider if you’re comfortable with the idea of risk versus return. Do you want your life insurance subject to market fluctuation or not?