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Permanent Life Insurance

Key takeaways

    • Permanent life insurance offers lifelong coverage, your policy never expires.
    • Permanent policies may accumulate a cash value that you can borrow against.
    • Within the category of permanent insurance, there are several types of products

What is permanent life insurance?

Permanent life insurance is a type of life insurance policy that doesn’t expire as long as you continue to pay the premiums. It’s designed to last for your entire life, so you have a guaranteed way to leave behind financial support for those you choose.

Protecting your family is important, which is why life insurance is so valuable in general. That said, not all life insurance is the same. When shopping for coverage, your two main options are term and permanent life insurance. Term life lasts for a certain period of time, while permanent life insurance provides lifelong coverage. Permanent is more expensive than term, but the added cost can be worth it if you need a guaranteed way to provide for your loved ones financially.

Permanent life insurance builds cash value over time, too. That means it may also help you meet financial needs during your lifetime. You may be able to borrow from it during your lifetime or use the cash value to help fund a retirement account.

Does permanent life insurance expire?

A permanent life insurance policy is designed to last your entire life, from the time you buy it until you die or stop making payments.

Most permanent policies today “mature” when the policyholder reaches the age of 121. At that point, the policy ends and the life insurance company pays out the death benefit. For most people, a permanent policy will pay out long before it matures, of course.

What is permanent life insurance for?

Wondering, “Should I buy permanent life insurance?” Permanent life insurance is designed to accomplish two things:

  • It provides a safety net or an inheritance for your family in the form of a death benefit which pays out after your death.
  • It allows you to accumulate savings that you can borrow against later in the form of a cash loan.

How much does permanent life insurance cost?

Permanent life insurance is generally more expensive than term life insurance. That’s because these plans come with added features and benefits beyond what term life offers.

Term life insurance is designed to provide affordable protection right when you need it, like during the years you’re raising a family or paying a mortgage. For many people, that level of coverage is enough. For others, like older adults who want a guaranteed way to cover funeral costs, permanent life can provide the peace of mind they need.

Certain factors influence the cost of permanent life insurance, including your age, health, lifestyle, and how much coverage you’re looking to buy. When you apply, the life insurance company will consider these factors and give you an estimated price for the policies you’re interested in.

To decide if permanent life insurance is the right investment, weigh the pros and cons. Consider how this policy fits into your budget, along with the benefits it offers to you and your loved ones. If you’re unsure which is the best choice for your family, comparing term and permanent life insurance quotes can help you find the right fit.

How does permanent life insurance work?

With a permanent life policy, your premiums are usually set at a fixed rate. The death benefit is typically guaranteed. And, after a waiting period, your policy begins to accrue cash value. In some cases, the policy cash value can be cashed out completely.

Types of permanent life insurance

There are two main types of permanent life policies: whole life and universal life. Each policy has its distinct advantages.

Whole Life Insurance

A permanent whole life insurance policy has a fixed insurance premium and fixed payout, making it simple to budget for and manage. With whole life, the interest rate applied to your policy does not go up or down during your lifetime, creating a guaranteed death benefit.

With whole life, the insurance company may share part of the earnings it achieves from investing the premiums of policyholders. The policy accrues a cash value that you can borrow against, usually at a low rate of interest and without a credit check. If you borrow or withdraw funds from your account and do not repay it, that may reduce the cash value and death benefit.

Learn more about whole life insurance.

Universal Life Insurance

A permanent universal life insurance policy is designed to provide more flexibility than a whole life policy. It allows both your premiums and your death benefit to increase or decrease over your lifetime.

With universal life insurance, each monthly premium you pay is divided between the death benefit and the cash value. Your life insurance company will charge you a minimum premium to maintain the policy. You can pay more than the minimum to grow the cash value in your policy faster.

As you invest in your universal policy, the cash value grows at the current interest rate. It’s not fixed, like it is with a whole life policy. Rates may grow or fall based on current market conditions, though they don’t fall below a set minimum rate.

How might permanent life insurance work for you? Could term life be a better fit? Here are some things to take into consideration before you buy.

Policy type Term life Whole life Universal life
Length of coverage Set length of time, typically 10, 15, 20, or 30 years Your entire lifetime Your entire lifetime
Death benefit Guaranteed fixed amount Guaranteed fixed amount Death benefit can go up or down based on market performance
Premiums Stay the same throughout the policy Level premiums throughout lifetime Adjustable, with minimum requirements
Cash value No Yes Yes
Cost Least expensive option More expensive than term More expensive than term
Interest rate N/A Interest rate fixed Interest rates may change over time
Length of coverage Term life Set length of time, typically 10, 15, 20, or 30 yearsWhole life Your entire lifetimeUniversal life Your entire lifetime
Death benefit Term life Guaranteed fixed amountWhole life Guaranteed fixed amountUniversal life Death benefit can go up or down based on market performance
Premiums Term life Stay the same throughout the policyWhole life Level premiums throughout lifetimeUniversal life Adjustable, with minimum requirements
Cash value Term life NoWhole life YesUniversal life Yes
Cost Term life Least expensive optionWhole life More expensive than termUniversal life More expensive than term
Interest rate Term life N/AWhole life Interest rate fixedUniversal life Interest rates may change over time

Advantages of permanent life insurance

A permanent life policy can give you security for the rest of your life, and the ability to access funds if needed for major life events.

A main benefit of permanent life insurance policies is they don’t expire. You don’t need to buy a new policy at the end of at term with a significantly higher premium due to your age and health.

Permanent life policies enable you to take out a loan to pay off a home mortgage early, cover a child’s college tuition, or even go on a vacation.

You may also have the option to completely cash out a permanent life policy. Your cash value typically starts accruing  after a few years. It increases slowly over time until it matches the face value of the policy. You can then withdraw the cash value completely and terminate the policy if desired. Such a withdrawal could have tax consequences, so consult a tax expert for specific impacts.

How to choose the right permanent life insurance

Wondering whether permanent life is right for you? Since premiums for permanent life insurance policies can be significantly higher than term, many people think they should start with a term life policy and switch to permanent coverage later in life. However, securing an available permanent life policy while you are young and healthy and have no medical issues can help you lock in lower premiums.

When considering any life insurance policy, think about your budget, needs, and goals in buying coverage.

If you decide permanent coverage is the way to go, think about the options available and which fits your life best now. Key things to keep in mind include:

  • Your eligibility. Certain policies, like final expense insurance, are designed for older adults. Health considerations may play a role in some policies, too.
  • Your budget. How much do you want to spend per month on premiums?
  • Coverage amount. Some permanent policies come in larger amounts to help cover big expenses, like supporting a spouse in retirement. Others offer smaller coverage amounts at more affordable rates to help cover funeral expenses or other end-of-life costs.
  • Cash value. Determine if the ability to borrow from your policy during your lifetime is a feature that’s important to you. For example, do you want to have access to the cash value during your retirement years? If so, look into the policy’s rules and how soon you can tap into the cash value after buying a policy.

The easiest way to get started is to request permanent life insurance quotes. Compare prices of the plans you’re interested in, and talk to a life insurance agent to compare features of specific plans and make the right choice.

Permanent life from Fidelity Life

A permanent life policy can give you significant peace of mind. If you are interested in lifelong financial protection, Fidelity Life offers several whole life insurance products.

Family running on a beach
Family running on a beach

Find a policy that works for you

There are a range of affordable Fidelity Life products to choose from based on your situation and financial responsibilities.

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Still need help?

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