Permanent Life Insurance

Term Life Insurance Policies

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As you plan your life insurance portfolio it is important that you have an appreciation of the difference between term and permanent insurance. This will help you make a better decision as to which type of policy is best applied to which need.

As the name implies a permanent life policy can be kept for the rest of your life. It has a level death benefit. That means that it never decreases as long as premium payments. The premiums are also level. They never increase.

Unlike term insurance, permanent insurance has a cash value which accumulates tax deferred thus creating 2 separate types of security for the policy owner and his or her family.

• The family is guaranteed protection in case of the death of the breadwinner and...
• There is a constant build up of cash that would certainly come in handy for unexpected needs.
• The funds can be used to help pay for college education for a child.
• If a business opportunity should present itself you will have funds that you can put your hands on pretty quickly.
• If there is no emergency, or no other reason to use the cash value, the cash can be used to top up retirement income.

If you were to examine all other financial instruments you will never find one that can do what permanent insurance can. It takes care of you and your family while you are alive and it provides for your loved ones after your death.

Let us look at some effective ways you can use the cash value of your permanent life insurance policy whether it be whole life, universal life, variable universal life or variable life insurance. These are the basic permanent policies. Some companies have other names for them but they usually fall under one of these headings.

• You can use your policy as collateral for a loan or you can borrow from your cash value. You are charged interest if you take a loan from the policy. The amount owed will be deducted from the death benefit, if a balance is outstanding.

• The cash value can be used as what is commonly referred to as an "automatic premium loan" in the event a premium payment is missed.

• If you choose to cash in the policy you can do so. You will receive all the accumulated cash value but you will no longer have your life insurance policy.

• If you wish to stop paying and still keep your insurance you can. You can choose a reduced paid up policy. This is a fully paid up single premium policy purchased by your cash value. It will continue to accumulate tax deferred.

  On the other hand you can choose what is referred to as an "extended term policy". The full face amount of your insurance will be maintained but for a limited number of years. This is paid for by the cash you have accumulated up to that point in your policy.

• You cash value can be used to purchase an annuity at retirement. There are many payment options to choose from if you decide to go that way.

As you can see the benefits of term insurance pale in comparison to those available with permanent insurance. With term insurance you pay a premium for a specific number of years and you are covered for that period of time. Upon death your loved ones will receive the face amount of the policy. Term is cheaper than permanent insurance but keep in mind that you have to die to win.