Permanent Life Insurance: Explanation of Permanent Life Insurance

Permanent life insurance will financially cover you and your family for as long as you live. If your death will have a great financial impact on someone else’s life, you may want to consider purchasing a permanent life insurance policy.

If you know you will never make enough money to invest or you know you will not be able to save money for your family in the event of your death, you can use permanent life insurance to ensure your family’s financial well-being after you are gone. Even the most reasonably priced permanent life insurance premiums will provide a substantial indemnity for your family.

Permanent life insurance can also be a savings vehicle, because it builds cash value with interest against which you can borrow. Putting your money into a permanent life insurance policy can offer it a tax shelter. The money and interest you accumulate will not be taxed until it is withdrawn. Your deferred taxation can even be avoided by taking your money out as a loan.

Permanent life insurance comes in three basic forms: whole life, variable life and universal life.

  1. Whole life is the most basic. It has a savings feature with interest that allows you to borrow against and it has a fixed premium and indemnity upon your death.
  2. Variable life has similar characteristics except it allows you to invest a portion of your premiums into vehicles such as stocks, bonds, and equity funds. Variable life is the most expensive of the three types of permanent life insurance.
  3. Universal life also has a savings feature similar to whole life and also has the flexibility to increase or decrease your premiums as well as using savings to cover your premiums. Also, the death benefit can be revised at any time. Universal life is also the least expensive of the three, with premiums comparable to term life insurance premiums.
Permanent Life Insurance: Explanation of Permanent Life Insurance

Permanent life insurance is an alternative to term life insurance which covers you for a predetermined amount of time such as 10, 20 or 30 years, and can expire without renewal options if you live longer. Term life insurance also does not have a savings attribute.

If you plan to hold a policy for more than 20 years, a permanent life insurance policy is a better solution. Assess your needs and your family’s needs, as well as your health, your lifestyle, your expenses and assets. This will help you determine how much coverage and what type of permanent life insurance policy fits you and your family best.

Permanent Life Insurance: Who Needs Permanent Life Insurance?

If you want to leave someone some money when you die, buy a permanent life insurance policy and name him your beneficiary. There are also those of you who need to financially secure the loved ones that depend on your income to survive.

Once you become a parent, permanent life insurance becomes very important. If you are the main financial provider for your family, your death will result in serious financial strain for those you leave behind. Some of the big-ticket items your death benefits will cover include:

  • Medical and funeral expenses.
  • The mortgage on your home.
  • Credit card debt.
  • Your children’s college education.
  • Estate taxes.

Permanent life insurance death benefits are tax free and can be used to pay the estate taxes imposed after your death. Estate taxes are based on the size of your estate, your assets, and which state you live in. The laws for estate taxes are in flux and your family may or may not have to also pay federal estate, state inheritance, capital gains or income taxes.

Couples whose children have grown and are self-sufficient may want to adjust their permanent life insurance policies.

  • As the breadwinner, you will want to provide for your spouse in the event of your death.
  • You may want to be able to leave a substantial inheritance to your grown children and grandchildren.
  • Through your permanent life insurance policy’s savings program, you can set aside a retirement income.

If you have a disabled child that will depend on care for his entire life, you will want to have permanent life insurance. Assess the care costs of your disabled child to ensure his continued proper care. Ensure the financial needs of your spouse and other children are also met in the event of your death.

People who do not need permanent life insurance include:

  • People who are wealthy and have plenty of assets to pass on to their heirs.
  • Single people who have no dependents.

What is the answer to the question: Who needs permanent life insurance? Anyone who is financially responsible for another person or anyone who wants to endow anyone else with his death benefits needs permanent life insurance.

Permanent Life Insurance: Who Needs Permanent Life Insurance?

Permanent Life Insurance: Permanent Life Insurance Rates

Your permanent life insurance rate will depend largely on how much you need. To get a general idea of how much you need, multiply your annual income by seven. There are, of course, other factors to take into consideration, including:

  • What type of permanent life insurance policy you want and what type of savings vehicle would you like it to be. The most expensive permanent life insurance policy is variable life insurance, next is whole life insurance, and the least expensive is universal life insurance.
  • How much coverage do you want? Keep in mind that if you buy your policy in your 20s, you will probably be paying for it for 50 or 60 years and into your retirement. Make sure it is an amount you can comfortably pay. Your insurer will consider your income, taxes and expenses to estimate how much insurance you can afford.
  • If you purchase your permanent life insurance as a healthy 20 year old, your premium will be lower than if you waited to purchase your policy as a healthy 40 year old.
  • As a woman, your life expectancy is about ten years longer than a man’s. This affords a woman a lower permanent life insurance rate.
  • Cigarette smokers pay higher premiums than non-smokers. There are variables between insurance companies and consideration may be allowed if you only rarely smoke a pipe or a cigar.
  • Under normal circumstances, permanent life insurance companies will perform a medical exam and will investigate your medical history. The most important aspects of your health will be blood pressure, cholesterol, cancer, and heart disease. Your medical history report will need to include any family history of heart disease or cancer.
  • Your weight is a major factor in your health and will be taken into consideration. Your rates will depend on your weight/height ratio; the more you weigh, the higher your insurance rate.
  • The last five years of your driving record. If you have speeding tickets or a DUI this will increase your permanent life insurance rate.
  • If you are a deep sea diver by trade, your insurance rate will be higher than an administrative assistant. A high-risk job will increase your rate.
  • If your pastimes include mountain climbing or bungee jumping, you will have higher premiums.
  • Shop around; there are substantial differences in rates between insurance companies.

Permanent life insurance is affordable and will make help your loved ones survive after you are gone.

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