Permanent life insurance is the ideal long-term solution for most individuals due to several reasons. The important aim of any life insurance policy is to offer protection to the financial situation of your family if you meet death. Permanent life insurance assures this to you and your family during your entire lifetime. At the same time, permanent life insurance, also termed as whole life policy, offers a built-in investment component. Savings accrue within the insurance policy and you could borrow against the accrued cash value in emergencies.
There are several advantages in permanent life insurance policy. They are
- Permanent life insurance offers life-long protection, as long as you are paying the premiums promptly without defaults. Except under extreme circumstances, your insurance carrier would not be able to cancel the coverage once it has been approved.
- If you plan for a long-term life insurance policy, permanent insurance is a better option. The premiums of permanent life insurance are comparatively much higher than term insurance policy but it is less expensive in long-term.
- Most permanent life insurance policies offer regular dividends, though they are not specifically guaranteed by the insurance carriers. Several insurance carriers even allow you to utilize the accumulated dividend amounts to meet premium payments. If the dividend values are substantial, your premium payments would be significantly lesser in later years or you might even reach a stage where your premium payments completely stop. However, the coverage would continue for life.
- Permanent life insurance eliminates the issue of future insurability. This type of policy does not expire after a specific period of time.
- Many permanent policies offer additional purchase options and you could buy extra coverage whenever you are able to afford that, irrespective of the state of your health.
- The biggest advantage of permanent life insurance is the building up of cash value. When your premium payments and declared dividends have accrued to substantial amounts, you could borrow against the policy. You could utilize this amount for a down payment for purchase of a home or meet the expenses of the education of your children. You could even invest the borrowed amount to generate income after you retire. However, when you borrow on your policy, it is like any other loan and you would have to pay loan interest amount. This could affect your policy value.
Permanent life insurance is particularly useful for elderly people. For them, the death benefit is more important compared to investment appreciation of regular savings. Normally, insurance carriers offer three types of permanent life insurance. Whole life insurance comes with a fixed premium and minimum guaranteed growth. Universal life insurance allows you to decrease or increase your premiums. Variable insurance gives you the freedom to select the mode of the investment of the cash that you pay out as premium. To conclude, term life insurance is ideal for younger people in the age group of 20 to 35 but permanent life insurance is the best option after the age of 40.
