Permanent Life Insurance

What is permanent life insurance?

Permanent life insurance is a type of insurance coverage that is meant to last until death. It is usually used for estate planning and/or leaving something behind for the next generation. It can also be used for tax planning strategies for some individuals with specific circumstances.

The premiums are much higher than term life insurance, however, the payment periods can be guaranteed and the need to pay premiums can eventually be removed. 
There are two main types of permanent life insurance:
  1. Whole Life Insurance
  2. Universal Life Insurance

Both can be structured in a way that you pay premiums for a certain number of years and after that, your policy can be paid up. 

After the payment period is over then you no longer need to pay the premiums however you own the coverage and whenever you pass away your beneficiaries will receive the benefit.
Permanent life insurance could be compared to buying a house. You are paying a higher price than the cost of renting would be, however, once the mortgage is paid off you now own the house.

Who is permanent life insurance for?

Permanent life insurance is not meant to cover you for a specific period during your life. 
It is life insurance that is meant to payout when you die, not if you die.
The most common uses for permanent life insurance are:
  • Providing funds for estate purposes (taxes, liquidity for expenses, funeral expenses, etc)
  • Providing an inheritance for the next generation
  • Providing a charitable gift to a cause you care about
It's a flexible tool that has its place in some financial plans, however, it's not meant for everyone and it shouldn't be used as a substitute for affordable term insurance.
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