Permanent life insurance

Permanent Life Insurance is a type of insurance where the policy accrues cash value, the life of the insured is covered and the sum insured is paid at the end of the policy term. Like other types of insurance, this plan provides permanent protection to the insured for his entire life or as per the contract agreement. It has the attribute of building up cash value, something from which you can borrow money in a financial crisis.

The cash value is very low in the beginning as the early premiums go towards expenditure of the advisor’s commission and sales charges. The cash value grows gradually depending on the dividends declared. There are a few things to keep in mind about this coverage. Term insurance is definitely cheaper than permanent insurance. Cash value reduces the death benefit by loans and withdrawals against cash value. Cancellation or lapse of the policy increases your tax liability.

Permanent Life Insurance with cash value provides the best solution to people on a long-term basis. This coverage provides life-long protection on the condition that the premiums are paid. Even though the initial premiums are high, this could be the best type of insurance in the long run. Protection is guaranteed for life, provided the premiums are being paid regularly. Cash value of this policy can be surrendered or converted into an annuity.

There are three types of Permanent Life Insurance:

Whole - the most common type of life coverage. This plan gives customers a definite cash value and a constant premium to be paid periodically.

Universal or Adjustable – After the initial premium is paid, further premiums can be paid any time. Further, the amount of premium can be decided by the insured. The amount of death benefit can be increased or decreased to suit the policy holder and also allows them to permanently withdraw cash from the policy.

Variable - similar to Universal, but the death benefits and cash values are dependent on the performance of the investments.