Permanent Life Insurance Policies

The world of permanet (whole) life insurance has changed a lot in recent years. Policyholders have more options than ever - which is great news, so long as you put a little time into learning the ins and outs of the game.


This page:

  • Explains exactly how a whole life insurance policy works

  • Makes a brief comparison between the major coverage types

  • Links to more information on each policy type

Save up to 75% on life insurance. The key to saving on life insurance lies in comparing quotes and policies from as many carriers as possible. Use our fast and free comparison service to get quotes from all the major carriers in your state, and see how much you can save! Start here.

Note: this page includes information on all types of permanent coverage: whole, universal, and variable. For info on whole coverage alone, click here.

The whole life insurance "concept"

Permanent life insurance is coverage for life. With this type of policy, your coverage will never expire and will never need to be renewed. The amount for which you are insured, the death benefit, will be paid to your beneficiaries at the time of your death - even if you live past 100.

Permanent life insurance is often also called "cash-value" insurance, which refers to an additional savings feature that increases the value of a policy.

In fact, "whole life insurance" is actually just one type of permanent policy, although many people use the term to describe any life insurance policy that never expires. Variable and universal coverage are the other major permanent policies. Unless you're certain that it's whole life insurance you want, it's wise to consider all three options.

Let's review how permanent coverage works, then we'll help you decide policy type is right for you.

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Choosing a permanent life insurance policy can be tricky. We recommend that you use InsureME to compare various insurers and to get more advice about what policy to select.

The "cash-value" part of permanent plans

Permanent life insurance is in some ways more like an investment than an insurance policy. Premiums on a permanent policy cover more than the actual cost of the policy, and the extra amount supplements a savings account in your name. This additional money accumulates in your account and is invested by the insurance company.

The "cash value" portion of your policy refers to this invested money and its earnings. Your account continues to increase and to earn money until your policy is redeemed. At this point, depending on the type of policy you have, the cash-value is either surrendered to the insurance company or included in the death benefit.

But the cash value portion of a permanent life insurance policy is more than just a tool to gradually increase the death benefit until your death. You have access to the money at any time during your life, so it can be used to cover an expense you might otherwise not be able to afford.

There are a couple of ways to use the "cash value" portion of your policy:

One way is to ask for a low interest rate loan from your insurance company, using the cash-value account as a guarantee. If you choose to pay off the loan,your death benefit will be reinstated as the initial face value of the policy (plus the entire cash-value amount earned while owning the policy, if you have requested that option). If you choose pay off the loan, the death benefit is reduced, usually by the amount of the loan.

The second option is to request the policy's cash-value to be surrendered or partially surrendered to you. Surrendering your policy is another name for terminating it. Fully surrendering it means the death benefit plus any cash value accumulation will be paid to you and the contract between you and the insurance company is ended. If you choose to partially surrender the policy, only a portion of the death benefit and cash value will be paid to you. Other aspect of the policy may be adjusted.

(Not every insurance company allows you to partially surrender your policy, and often the ones that do only allow it under extreme circumstances.)

How the cash value portion of your policy is managed is the basis for the major distinctions between types of permanent life insurance. Here's a brief comparison:

Whole life insurance comparisons

Permanent life insurance used to be a pretty standard product. This is no longer the case. Variations on the standard permanent life insurance policy have grown more popular in recent years. Increased consumer knowledge in the areas of life insurance and investing have resulted in demands to reshape the cash value portion of these policies.

The new alternatives allow customers more freedom and flexibility in terms of adjusting premium payments and controlling the investment portfolio. Each type has its own advantages and disadvantages, which should be investigated separately before making your final purchasing decision. Click on any policy type for more information.

  • Standard whole life insurance is the most basic of these options. Your insurer will totally manage the way the cash-value portion of your policy is invested.

  • A universal policy gives you a little more control. The invested portion is tied to shorter term interest rates, and the potential for profit (and loss!) grows.

  • A variable policy offers the most flexibility. The policyholder has a great deal of control over how the cash-value portion is invested. This type of policy should only be undertaken by those with the ability and inclination to closely manage their policy portfolios.

Not sure which one's right for you? Start with whole life insurance, and make your way through the others. Being well-informed never hurts!

Or, get some professional advice right off the bat! InsureME is a highly recommended online broker that will put you in touch with licensed agents in your area specializing in affordable permanent life insurance.
Try them here.

Learn even more:

Getting the lowest possible premium on your life insurance is almost like an art form. There are many variables to consider, and to get the right balance of term length, benefit amounts, and policy riders and illustrations, you need to take a careful step-by-step approach to the buying process.

Our free life insurance course is designed to help you do just that.

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