Permanent Life Insurance 101

Written by on July 31, 2012 in Money - No comments | Print this page


Picking the right type of life insurance can be complex and it is good to arm yourself with some basic knowledge about your options in order to make the best choice for you and your family. While it would be impossible to cover every nuance of this topic in one article, below you will find a good overview of permanent life insurance.

Permanent Vs. Term

Permanent life insurance is one of two major types of life insurance, with the other being term insurance. Term insurance offers coverage for a set amount of time, usually one to 30 years, and pays out the policy amount upon death. Permanent, or whole life insurance as it is also called, consists of two components—term insurance and an investment portion that can grow over time like any other investment.  Premiums for permanent insurance are much higher than term insurance.

There are Different Types of Permanent Life Insurance

Whole Life Insurance:  Whole life insurance has a set premium for the length of the policy, guaranteed death benefit and a guaranteed cash value growth. The policy holder has no control over the investments and you cannot change coverage once a policy is in place.

Universal Life Insurance: Universal life insurance gives a little more leeway to the policy holder in regards to the timing and amount of premium payments; you also have the option to adjust coverage. Like whole life insurance,  you have a guaranteed yearly cash growth and no flexibility when it comes to investments.

Variable Life Insurance: With variable life insurance, you are free to spread your investments where you like, whether it be a money market account, stocks or bonds. Because of the volatile nature of the market, the policy cannot guarantee a set amount of cash value growth over time. You cannot alter coverage amounts once the policy starts. There is more risk involved with this type of permanent insurance but also the potential for greater gains over the long-term.

Variable Universal Life Insurance: Variable universal life insurance is the highest risk type of policy—you can choose your investments and you have the ability to alter coverage amounts and premium payments. You may also have the option to make tax-free transfers between investments.

When it comes to choosing the right policy, you need to consider many factors, namely your tolerance for risk and your investment goals. Meet with a qualified financial professional for guidance.

You Can Borrow Against Your Policy

Because permanent life insurance builds cash value over time, you have the option to borrow against it, provided you have paid premiums for a certain amount of time. There are no limits to how you can use the money and it may be a better option than a standard loan, borrowing against a 401K or racking up credit card debt.  You can also cash out your policy at any time and received the accrued value; this option should be considered carefully though as it is only ideal in certain circumstances. As you age, insurance premiums increase and getting a new policy down the line may be more costly. If you still have financial dependents, this option is probably not the best idea.

Closing Thoughts

When it comes to the right life insurance policy it is best to consult with a qualified financial professional. There are so many variables that need to be taken into account when choosing the proper coverage. You want to make sure your family is taken care of and with whole life insurance, it may also offer you benefits personally while you are still here.



This is a guest post.  Kelli Cooper is a freelance writer who enjoys helping her clients grow their websites and expand their businesses. If you are interested in getting multiple quotes for Canadian life insurance, be sure to head over to


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