Permanent life insurance is also known as whole life insurance or endowment policy. Under permanent life insurance policy, the sum assured is paid out either on the death of the insured person or at the time of the expiry period of the policy. Further, nearly all permanent life insurance policies have a provision for cash value accrual through bonus amounts declared annually. Thus, permanent life insurance differs from term insurance policy in which the payout is done only if the insured dies during the term of the policy and there is no other cash value.
Since permanent life insurance policy pays out the benefit whether the insured person dies or remains alive at the end of the policy, the premium for permanent life insurance is always quite high compared to term life insurance. Thus, this type of policy is ideal to everyone for providing complete protection to the family members and also avail an investment component that is built-in in the policy through annual bonus or interest amounts offered by the insurance company.
The main advantages of permanent life insurance policy could be summed up briefly as under.
- Permanent life insurance provides protection throughout your life if you continue to pay the premiums without any default. Your insurance company would not be able to cancel the permanent life insurance policy unless extreme circumstances arise. Even if you get diagnosed with a terminal disease after you have purchased the policy, your insurance company would still be liable to pay the insured amount in case of your premature death.
- If you wish to have a long-term investment approach, then permanent life insurance is an ideal option. Even though the premium amounts are quite high for such policies, they usually prove to be less inexpensive over a longer period.
- Nearly all permanent life insurance programs offer regular dividends, even though insurance companies do not guarantee such dividends. Many insurance companies even permit you to utilize the dividend amounts to pay your premiums. If the dividend amounts are substantial, you could reach a stage where you need not even pay your regular premiums but utilize the dividend amounts to meet the premium payments.
- Most of the permanent life insurance programs allow you to purchase additional coverage. Hence, you could buy more coverage on the same policy if your income level rises after a few years.
Hence, permanent life insurance is preferable both as a protection against premature death and as an investment avenue where the amounts invested through premium payments continue to grow.
