Common Types of Permanent Life Insurance

There are 3 common types of permanent insurance are namely, the whole life, universal, and variable. The permanent plan provides insurance coverage for the entire life of the policyholder.

This type of plan is gaining prominence in the market place because it makes a good financial investment, in addition to providing attractive death benefits to the beneficiaries.

A portion of every premium paid goes into an account which builds a tax-deferred "cash value". The beneficiaries receive death benefits when the policyholder dies, as long as the premiums were submitted. This type of policy is predictable, most of the times, because the premiums are fixed over the life of the policyholder.

Whole life policy

The whole life policy offers a fixed premium, guaranteed return on cash value and guaranteed death benefit, which makes it a straightforward form of permanent policy. However, because these guarantees cannot fluctuate, the whole life policy is often more expensive.

The high cost is also attributed to the fact that the chances of a young, healthy person dying are very low, and increase as a person gets older. Therefore, the plan is often priced as if the applicant is going to live to old age.

Therefore, in the former years the premiums are often higher than you would otherwise pay for other plans. Fortunately, if you shop around and compare different whole life insurance quotes you stand a very high chance of getting a good deal.

After a stipulated time period, the policyholder often receives some flexibility with their cash value. Therefore, they can cancel the policy to get the surrender value or borrow against the plan. Nevertheless, the longer a person holds on to their policy the greater the total returns.

Universal life policy

The universal plan does not provide the same guarantees of the whole life policy. However, the premiums are cheaper, but increase up to a certain maximum amount. The universal plan allows the holder to get a minimum return on their cash value. However, the amount can grow rapidly because holders can earn more money when the markets go up.

Variable life policy

The variable life policy is not very different from the universal policy, except that policyholders get to choose how they wish to invest their money from a list of funds and securities.

Therefore, it offers the most risk and flexibility compared with other permanent policies. There is no guarantee on the minimum return; in the event that the investments a holder chooses perform well, their cash value grows, but if not, their cash value falls.