Permanent Life Insurance is an insurance policy that is guaranteed to stay in effect for the entire life of the insured, as long as required-minimum premiums are paid. The insured pays a premium to be paid monthly to the insurer, which accumulates during the insured’s lifetime and is not taxable. If the insured should die during the allotted period, then his beneficiaries would receive the insurer’s payment.
Insurance is a contract or agreement between an individual and an insurance company. At the time of purchase, the buyer of this insurance can choose between two different contracts. One contract offers a cash value or a death benefit. The cash value is what the person would receive upon the death of the person covered by the insurance, and the amount of death benefits is determined by the amount of coverage and the cash value. If one should pass away during the course of time, the money goes to the beneficiary designated by the insured.
Under a cash value of a permanent life insurance plan, the insurer pays the death benefit upon the insured’s death. If the person had made regular premiums payments, this amount would be invested, and a return on investment occurs. The more premiums paid, the more money goes into the savings. When the person reaches a certain age, the remaining balance of the cash value of permanent life insurance happens to be taxable. This makes it possible to access the money with tax advantages.
Another form of permanent life insurance policies is the term policy. In a term policy, the death benefit remains unchanged for as long as the beneficiary lives. In this type of plan, the insurer invests. If the beneficiary dies before the end of the stated period of investment, the premium payments are made directly to the investment vehicle instead of the beneficiary. A term policy can have a limited beneficiary only.
Permanent life policies can be of several types, including term, whole life, variable and universal. A term policy provides coverage only for a specified period. Whole life policies are considered the most expensive of the three options because they provide coverage for an entire lifespan. Variable and universal life policies are moderately priced and provide coverage for a specified period and the rest of your life. Although most whole life policies provide death benefits, the death benefit in variable and universal policies may be tied to the performance of the underlying investments.
Leave a Reply