Permanent life insurance policies provide lifelong coverage so that your loved ones can get the financial security they need to cover expenses in the event of your passing. But when you start to research permanent life policies, you may find there are a few more options than you realize, each with their own features and benefits. With that in mind, let’s dive deeper into some types of permanent life insurance plans and their pros and cons so you can choose a plan that will meet your specific needs.
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Whole life insurance
Whole life insurance is one of the most popular options for permanent life insurance customers. Like all permanent life insurance options, this type of plan lasts the entirety of a policyholder’s lifetime. Policyholders pay premiums that go toward the death benefit and the cash value, which can grow tax-deferred over time.
Pros
- Accumulates cash value
- No expiration date on the policy
- Withdraw money from your policy at any time
Cons
- Can come with high premium payments
- Interest from cash value grows more slowly than retirement or investment accounts
Universal life insurance
Like whole life insurance, universal life insurance lets you pay premiums that go toward the death benefit and cash value. But this plan also comes with some added flexibility to your premium payments and interest rates. Universal life policies give you the ability to adjust the premium amount you pay each month, allowing you to overpay when there’s a surplus in your budget and letting you pay less when money is tight.
Universal life insurance policies also typically have variable interest rates. So, your cash value can grow faster or slower depending on the insurance company’s policies.
Pros
- Adjustable premium payments
- Opportunity for high interest returns
Cons
- No locked-in premium rate, so if you underpay now, you may have to overpay later
- Interest rates can be lower and potentially limit your returns
Variable life insurance
Another type of permanent life insurance you can consider is variable life insurance. As with universal life insurance, variable life insurance policies offer you flexibility in your premium payments and interest rates. The main difference is that variable life policies allow you to put the accumulated cash value of your policy into investment accounts, which can give it the opportunity to grow faster.
While the cash value of variable life insurance may not be an effective substitute for investments, this feature can give you added adaptability in how you decide to grow the cash value of your policy.
Pros
- Adjustable premium payments
- Option to reinvest your cash value into bonds, securities, or mutual funds
- Potential for high interest rates
Cons
- Reinvesting cash value carries a risk of low returns
- As with all permanent life insurance policies, premium payments can be high
Find the right permanent life policy
Customers in need of lifelong coverage and the opportunity to accumulate cash value can benefit from what permanent life insurance has to offer. While these types of policies can be more expensive than term life insurance, their accessibility and savings options can make them well worth it. If you’re in need of a permanent life insurance policy, do your research and compare options to find the right plan for your needs. This way, you’ll know your loved ones will be financially protected if the worst should ever happen.
