Permanent life insurance lives up to its name: It’s an insurance policy that lasts your entire lifespan. This means that whether you live for five years or 80 years after purchasing the policy, your death benefit will still be paid out.
As you can see, permanent life insurance is ideal for people who prioritize peace of mind.
Permanent life insurance is different from term insurance, which is a policy that expires after a set term chosen upon purchase (example: 10 years or 20 years).
Permanent life insurance also offers a cash value component, which we’ll dive into soon. The cash value option and the fact that the policy never expires can be a very attractive life insurance option for many.
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Permanent life insurance has a unique savings feature built into the policy that’s separate from the death benefit. As you make your payments to the policy (also known as your premiums), you build up a cash value that you can typically borrow from. This means that your permanent life insurance policy can have real-time value to you during your life, rather than just being paid out to your beneficiaries after your death.
Each policy has different terms attached to the cash value component, but generally, there’s a certain amount of time between purchasing the policy and when you can start to borrow against the cash value if needed, in order to let the cash accrue.
As you pay your premiums, a portion of that goes into the cash value account. This account gains interest at a rate set out in your policy (more on that below).
Permanent life insurance is also tax-deferred, meaning that the growth of the cash value account isn’t taxed until payout, as long as the policy is active and in good standing. As well, many loans from the cash value account up to a certain limit are not taxed either.
Life insurance on the whole is a great option if you’re looking to ensure your beneficiaries are taken care of after your passing. Permanent life insurance is just one of the options from which you can choose, and it has a few key benefits.
Permanent life insurance offers more possibilities than other insurance options, especially compared with the limits of term life insurance.
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The main difference between the two forms of life insurance is that term life insurance is set for a specific term, like 20 years, when you purchase it. After that term is up, the policy is void.
It can be possible to convert a term policy to a permanent policy in some cases. Permanent life insurance exists for no set term and never expires; it also has the added component of the cash value account.
When choosing between term versus permanent life insurance, it’s important to consider these main differences. If you think you’ll get value from the cash value account, it may be worthwhile to choose permanent life insurance.
However, permanent life insurance is typically more expensive than term life insurance, so it can make more financial sense for many to choose term life insurance.
The reason the cost of permanent life insurance is generally much higher than term life insurance is that a portion of your premiums is being paid to the cash value account.
You’re not only paying for coverage that never expires, but you’re also paying for an investment account.
So, if you’re comparing rates for term life insurance versus permanent life insurance, it’s important to factor in that significant difference and knows that the rates can’t be compared on their cost alone.
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Once you’ve decided which plan is right for you, it’s important to get multiple quotes from providers in order to best compare plans. Alternatively, you can get one quote that matches you with your ideal provider, giving you the best coverage at the best price.
This is what we do. We’ve hand-picked the best permanent life insurance providers and then, using the information you provide on your quote, we pair you with your ideal carrier. No exhaustive search for quotes needed.
Once you’re matched, your agent or insurer can help you fully understand your permanent life insurance plan—after all, it’ll be your plan for the rest of your life.
It can be confusing to know whether term or permanent life insurance is a better fit for you. The permanent life insurance options are typically better for you if:
Because of the investment component of permanent life insurance, it can be much more complex than term life insurance. If you’re not interested in having an investment vehicle or the inclination to manage one, permanent life insurance might not be right for you.
Permanent life insurance can be a great way to have peace of mind, knowing your beneficiaries are taken care of.
Permanent life insurance can be complicated, but for many, worth it financially. You’ll ensure your loved ones are covered no matter when you might die, and you have a flexible cash value/investment account during your lifetime to boot.
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A permanent life insurance policy is one that never expires. Your death benefit will always be paid out to your beneficiaries, no matter when you die.
Term insurance is for a set term, like 10 or 20 years, that is chosen when you purchase the policy initially. Permanent life insurance has no set term and lasts your entire lifetime. Term plans can sometimes be converted to permanent life insurance at the end of their term.
Lauren Lewthwaite Lauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.
