PERMANENT LIFE INSURANCE

Permanent life insurance policies protect the owner for as long as the premium payments are made. Permanent life insurance policies offer fixed or flexible premiums, guaranteed or non-guaranteed clash of values which accumulate as a result of the premium and investment performance. Some permanent policies offer policy dividends.

Whole Life insurance Policy (aka traditional): provides a lifetime protection for as long as the preview and are paid.

As premiums are paid, the life contract develops cash value. These values accumulate in the early years so that in later years enough money would have accumulated in the cash-value to pay the promised death benefit and keeping the premium leveled.

The policy owner agrees to pay level premium amount generally to age 100, in return, the insurance company agrees to pay the beneficiary a fixed and death benefit when the insured prematurely dies.

Policy owners who wish to terminate their policies are entitled to scheduled cash surrendered a value.

Variable Whole life insurance policy: Is a whole life insurance policy whereby the policy owner dictates where the fund in the cash-value is to be invested among several separate accounts. The cash value in those separate accounts is based on the market performance of the assets in those are separate accounts. The policy owner bears all the investment risk associated with those of separate account.

Death benefits may increase or decrease, but not below the guaranteed a minimum.

Universal Life Insurance Policy UL (aka Flexible Premium): is a permanent policy that allows of the flexibility to adjust the premium payments. The premium payments can be made from month to month within limits, and the premiums and can even be skipped as long as the cash-value sufficient to cover the policy monthly charge.

If the premium payments have been skipped too many times, and fall too low when compared to the policies cash-value, the policy may be in danger of lapsing.

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Most universal life insurance policies offer two types of death benefit the options

Option A: Fixed (level) death benefit option stays in level for the term of the contract.

Option B: Is equal to the specified level of pure insurance plus the policies cash value at time of death, thus, the death benefit increases as a cash-value increases as well.

Variable universal life insurance policy VUL: is a universal life insurance policy whereby the policy order dictates where the fund in the cash-value is to be invested among several separate accounts

Under Option B, the death of benefit will vary directly with the change in cash-value.

Since variable life and variable universal life are considered securities, coliseum owners must be given a prospectus. In addition, when proposing VL or VUL, a suitability report must be completed to make sure that the policy owner has a basic understanding of investment and is capable of making good investment decisions.

Contrary to universal life and a whole life when dealing with Variable Life and Variable Universal Life, the policy owner must be willing to bear the entire risk of investment since the cash-value is not guaranteed.

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CASH VALUE

The cash-value in a permanent insurance policy may accumulate tax free or tax-deferred, depending whether the gain a distributed at death or during the lifetime.

In general, the effective rates of interest on the cash-value have been higher than those on tax free municipal bonds. The rates have been more closely related to high grade corporate, government bond, and mortgages.

Policy cash-value can be borrowed it had lower interest rate and then traditional loans. Although the policy owner must pay interest on the loan, the cash-value continues to grow inside the policy at least at the minimum guaranteed interest rate.

Policy owners can borrow or withdraw a portion of the cash-value without surrendering the policy. If, at the time of death, the funds borrowed and the interest accrued have not been returned to the policy, the death benefits will be reduced by the amount of the loan plus interest accrued.

Advantages of Permanent Life Insurance

Protection for as long as the premiums are paid

Premiums can be fixed or flexible to meet the premium payer financial wishes

Policy accumulates cash value that in-turn can be borrowed against

Cash value can be surrendered in part or in total, or provide income at retirement

Disadvantages of Permanent Life Insurance

If not kept the long enough, permanent life insurance can be more expensive than term life insurance

Cost of required premium may make it harder financially to purchase additional insurance.

Surrendering the policy within the 5-10 years, may result in great lost on the part of the policy owner.

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