Although both term life insurance and permanent life policies have their advantages, if you prefer permanent life, here are key guidelines to help you choose the best option:
- All policies are not created alike. Whole Life insurance combines a fixed premium with a guaranteed cash benefit and a death benefit. Universal Life offers a flexible premium plan that works like a combined term life insurance policy and bank account; you pay as much money as you want and the leftover funds paid will earn a variable interest rate. Variable Universal Life is similar, except that you can choose between mutual funds in which to invest your cash value.
- Because permanent life is written for a lifetime, rather than a limited term, you will be required to take a medical exam – the better your health, the lower your premium.>/li>
- Permanent life provides a tax-free investment vehicle. In most cases, a loan against the cash value of your policy will not be not taxable – and cash withdrawals (for tuition, medical expenses or other emergencies), up to your basis in the policy, will be tax free. What’s more, the “forced savings” of permanent life can help you build a financial safety net.
- Check the reputation and financial stability of the insurance company, as well as the underlying performance of its investments.
- You’ll pay more for permanent life than for the same amount of term insurance. Premiums depend on your health, age, and gender, as well as how much coverage you buy. Permanent life policies have sales charges, administrative fees, a mortality risk charge and fund management fees. If you cash in your policy during a certain period, you might be charged a surrender fee.
Our Life insurance professionals stand ready to offer you their advice on making this important decision.