Permanent Life Insurance is that particular kind of insurance that offers policyholder’s payment of flat premium for any specific duration of time. Apart from the assured death benefit, there is also another kind of advantage that can be availed from such policies, and that is their cash surrender value. A permanent life insurance is often considered as a kind of cash reserve that can be properly utilized once the policy holder reaches the age of retirement.
Guaranteed cash value is one of the major advantages associated with whole or permanent life insurance policies. From the time of paying your first premium, as a policy holder you have an assured payment of a specific amount once you reach the certain age when the policy will be no more functional. There is another kind of such policies and that are the dividend paying permanent life insurance policies. You can withdraw the dividends in the form of cash any time prior to your retirement or the maturity of the policy after a certain specific age. This kind of insurances also allows you to procure low interest policy loans depending upon the return on your policy.
Returns on permanent life insurance policies are tax free but there are strict rules that are required to be followed. But you must also understand one important thing that most people are not suitable candidates for permanent life insurance. Paying the premium regularly year after year often proves to be pretty difficult and that is the reason that most such policy holders cancel their policies midway. According to a recently conducted study, around 20% of permanent life insurance policies in America are terminated within the first three years and 39% more within the next seven years. In order to produce some decent profit, a permanent life insurance policy is required to be kept for a minimum period of 20 years and as more than half the total number of these policies in the U.S. dies within the first ten years it is always better to take your time and be sure of affordability prior to investing in a plan like this.
Apart from that more than half of the premium paid during the first year is spent on providing upfront commission to the agents and the managers and until and unless a policy like this runs for a long period of time there is little profit that you can actually make as a policyholder.
