Permanent life insurance

Many people are interested in life insurance plans but think that they are too expensive or that it is not quite time yet to get one. As people become more knowledgeable about the types of insurance plans that are offered, they learn that there are a significant amount of options available to them, at a multitude of price points, and each with unique benefits. While a term life insurance plan offers higher payouts to beneficiaries, the money put towards premiums does not provide any benefit if the policyholder outlives the term of the policy. Each type of insurance plan has benefits for certain people. If you are curious about how permanent life insurance plans work, and whether they are right for you, General has the answers you need.

A few basic things you should know about permanent life insurance plans as you starting your journey to finding the right policy include pricing. Permanent life insurance policies have higher premiums than term life insurance policies do. Since most people’s financial obligations go away over time, term life insurance is most often the best option for a person. If you need lifetime coverage, however, and have the ability to purchase permanent coverage, there are many benefits. This is a fantastic way to keep your loved ones financially protected or provide to other beneficiaries as you choose.

What Is Permanent Life Insurance?

A permanent life insurance plan is a plan that lasts for a person’s entire life, so long as they pay for their premiums on time for the life of the policy. This could be a large number of years depending on how long a person lives. Permanent life insurance plans cost more than term life insurance policies on average. Keep in mind that term life insurance plans do increase in price after the term if you decide to renew. There are a few benefits of permanent life insurance that term life insurance plans do not offer. This includes a cash value component and a plan that is valid for the entire life of the policyholder.

Having a cash value component can provide benefits to the policyholder while they are alive, while also providing a death benefit to beneficiaries upon their passing. Whether the policyholder dies shortly after purchasing the policy or 40 years later, the death benefit goes to the beneficiaries as long as the policyholder has maintained their payments as outlined in the contract.

When picking up a permanent life insurance plan, make sure to be honest on the application. Lying on an application is considered insurance fraud and can result in your beneficiaries not receiving their payout. There are other harsh penalties a person can run into by lying on their application.

People looking at permanent life insurance plans will go under an underwriting process in most cases. There are required medical examinations, but these exams bring down the cost of the policy in a large percentage of the cases. A no-medical policy is also available, though these have limited death benefits and cost more money on average. Guaranteed acceptance life insurance policies are only available with permanent coverage. There is a small percentage of people who need these policies, and the policies of this type are generally quite expensive. Unless you have a severe condition or cannot handle routine activities on your own, most professionals do not recommend a guaranteed acceptance policy. 

The Benefits Of Cash Value In Life Insurance

Most people are aware that the beneficiaries of a life insurance plan will receive a payment upon the passing of the policyholder. Fewer people are aware that permanent life insurance plans are available, and that they have a cash value element. You can borrow money from this cash value once it has reached a certain size, while you are still alive. In some cases, the money that a life insurance plan is making each year will reach the point where the dividends pay the premiums of the policy in your cash-value account.

If you decide to borrow against the policy, no credit checks will be required, and there are no qualifications. This is due to the insurer holding the money to cover the loan already. The loan also does not have to be paid within a specific period of time, for the same reason. A small interest rate is applied to these loans. Keep in mind that if you pass away before the loan is paid back, the remaining loan balance will be deducted from the death benefit your beneficiaries receive.

Keep in mind that the cash value of a permanent life insurance plan is separate from the death benefit of the policy. Beneficiaries will generally not receive any cash value on the plan, which is something to keep in mind while navigating the policy's financial aspects. Also, take note that there are tax benefits of permanent life insurance. The cash value of permanent life insurance plans will grow tax-deferred, similar to gains in a retirement account. There are other tax benefits to these types of plans as well.

Types Of Permanent Life Insurance Policies

There are a few different types of permanent life insurance policies available. One of the main differences between the policies revolves around premium payments and how they are applied. Another difference is how the cash value account grows over time. Permanent life policy types include whole life insurance, universal life insurance, variable life insurance, indexed universal life insurance, variable universal life insurance, and guaranteed universal life insurance. The premiums a person pays, as well as the cash value, have differences, explained here.

Whole life insurance policies have premiums that are level for the length of the policy. Also, the cash value grows at a guaranteed rate.

Universal life insurance has maximum premiums that are set, as well as minimums. You can pay any amount between these, and you can also pay for the premiums using the policy's cash value when it reaches a certain point. The cash value growth is based on the performance of the market. There is a guaranteed minimum annual return, however.

Variable life insurance has multiple types of premium options. They can be level, or they can vary, depending on the policy you purchase. One of the benefits of variable life insurance is that you get to choose how to invest the cash value from a set of options. These options are generally similar to mutual funds.

Indexed universal life insurance also has minimum and maximum premiums that are set. You can pay any amount between these maximums and minimums. Also, you can pay for your premiums using the policy's cash value. Indexed universal life insurance plans grow based on the performance of a specific index. There are caps on annual returns with this type of policy, and there are also guaranteed minimum annual returns. Variable universal life insurance policies also have maximums and minimums that are set. You can pay any amount between these. Premiums for the policy can be paid using its own cash value. Investments in these plans are selected by the policyholder, chosen from a set of options that are similar to mutual funds. 

Another type of life insurance plan is guaranteed universal life insurance. Premiums are level for the length of the policy, and there is generally not any cash value component worked into this plan type.

Riders can also be added to your policy, allowing for more flexibility. There are options for people who want to combine term life insurance and permanent life insurance as an example.

How To Convert From A Term Life To Permanent Life Plan

Some people decide to convert their term life insurance plan to a permanent life insurance policy. This is an option for many policies, and if you believe you may be interested in doing this in the future, make sure you are purchasing a plan that offers this benefit. When your term life insurance policy nears its end, it can be a smart plan to convert your policy.

In many cases, it is an option to either change the entire policy or just change a portion of it. Permanent life insurance costs are partially based on age; you will pay higher premiums if you convert when you are an older age, as opposed to a younger one. Permanent life insurance costs more than term life insurance in most cases. When you are young, purchasing a term life insurance plan can be a fantastic option, converting to a permanent life insurance plan when you have more income and fewer expenses. It can also be possible to switch to a permanent life insurance policy without a medical exam, which can result in lower premiums overall.

Term Vs. Permanent Life Insurance

People are often interested in the differences between term life insurance plans and permanent life insurance policies. The main difference between these two insurance types is that term life insurance will only provide coverage for a period of time stated when the policy is purchased. These plans can be for ten years, 20 years, and in some cases, 30 years. There are also not any cash value components to term life insurance plans. This drives the cost of these plans down. It also means that beneficiaries will receive no benefit if you outlive the plan. It is possible to put return of premium add-ons to some term policies, which increase the cost of the policy. This add-on allows you to receive the premiums you paid if you live past the term stated in the policy.

In most cases, people will opt for term life insurance. It has a lower cost in terms of premiums. People do not often require life insurance coverage for their entire life as their financial obligations will generally be reduced significantly over time. As you get older, you might not have to save money for your children to go to college, pay off your mortgage, and other financial obligations often drop off. 

Cost Of Permanent Life Insurance

Knowing what these types of insurance policies can cost is essential to budgeting and selecting a plan. Permanent life insurance rates are significantly higher than the rates people pay on average for term life insurance. This is because the plans are guaranteed to pay a death benefit as long as you are keeping up with your premium payments as agreed. Permanent life insurance plans give people the option of choosing how long they want to pay premiums. You can choose to pay these premiums for your entire lifetime, a specific number of years, until you reach a certain age, and lump-sum payment opportunities are also given. The amount you will pay for a plan is affected by the age at which you purchase the policy, the amount of real benefit the policy will pay, and other things. Keep in mind that the dividend from the cash value of your policy can be applied towards your premium in many cases, and will sometimes grow to cover the entire expense of premiums for the rest of your life.

At General, you can find the best rates for life insurance policies available, including the best permanent life insurance plans available to suit your needs. Comparing rates from multiple companies is one of the best ways to save money, and the tools to do this quickly and efficiently are found here. Purchasing a policy can bring fantastic peace of mind to policyholders. Knowing that your loved ones have financial assistance after you pass away is a relief, and your beneficiaries will appreciate the help.