About Permanent Life Insurance
The words, permanent life insurance can include many types of life insurance policies. As is indicated by the words themselves, permanent life insurance implies that this type of policy does not expire in your lifetime (which now a days means age 120 - also called the maturity date). There are a number of policy types that fall under the permanent life insurance name. Here are the main ones:
Whole Life Insurance
Whole life insurance insurance is probably the most well know type of permanent life insurance. It has always been the one to go to when a truly permanent policy was needed. Although rates tend to run higher with whole life. These types of policies are the only ones that when it matures, cash value will equal the face amount of the policy. In other words, if your policy face amount is $100,000, when the policy matures, the cash value of the policy will also be $100,000. This may explain why whole life policies tend to price higher than other types of policies.
Universal Life Insurance
Universal Life Insurance, also called flexible life insurance, is probably on par today with whole life insurance in terms of popularity. When if was first introduced, universal life's main features where flexibility an lower premium than whole life insurance. The main issues with universal life insurance were its guarantee period. As a permanent policy, universal life insurance was not very permanent. It was not uncommon for these policies to lapse within ten years unless higher premiums were paid by the policy owner. Today, universal life has come a long way and is much more of a permanent policy than it used to be. It is much more common to find universal life policies that offer lifetime (age 120) guarantees at lower premiums than whole life. Keep in mind that if all you want is a lifetime guarantee and low premiums, you cannot expect much or any cash value at the end of the term.
Indexed Life Insurance
Indexed life insurance is much newer than any of the two above. Actually indexed life insurance is really just a variation of universal life. Indexed life insurance is different from standard universal life in mainly one aspect - the interest crediting method. Standard universal life credits a basic interest to your policy on a yearly basis. Indexed universal life, on the other hand, credits an interest based on a index (such as S&P 500 or NASDAQ 200...). Indexed universal life seem to have been created in response to customers who wanted all the benefits of standard universal life but also the opportunity to earn higher interest on their cash value account. As a permanent life insurance, indexed universal life can also offer lifetime guarantees and flexibility
Variable Life Insurance
When it comes to permanent lifeinsurance, we feel that variable life insurance should be one to watch carefully. In other words, when you receive your policy statement (which can be as often as monthly), be careful to look for the policy's guarantee period. Since the interest or internal rate of return of the cash value variable life insurance can be tied to equities (read potential cash value losses), the guarantee period, which is tied to the amount of money in the cash value account, can be greatly affected. Simply put, lower cash value can equal shorter guarantees and potential early policy lapses.
