Description
In contrast to term life insurance, permanent life insurance provides insurance protection over one's entire lifetime.
Permanent life insurance is available in two basic forms, universal life and whole life. Although both forms offer protection over the lifetime of the insured, their structures are different.
Generally speaking, universal life will permit a lower cost per thousand of insurance, but its projections are more volatile.
Fixed universal life passes on more pricing risk than whole life meaning that the owner assumes some of the risk of the cost of insurance and also assumes the risk of fluctuating interest rates.
In contrast, whole life insurance offers a guaranteed cost of insurance and minimum guaranteed cash value. Unlike universal life, whole life is designed to be inflexible but offers guarantees in return.
Each form has advantages over the other and the selection should be based on the long-term objectives of the insured.
Objective
To help prevent financial difficulty caused by the death of the insured.
Suitability
Suited for individuals and business owners with long-term life insurance needs who have the cash flow to pay the annual premiums.
Product Features
- Tax-deferred Growth - The cash value of permanent life insurance grows tax-deferred.
- Tax-advantaged Loans - Withdrawals and loans against the value of the policy are, with certain restrictions, free from current taxation.
- Federal Tax Advantages - Death benefits pass to the beneficiary free of federal income taxes.
- Higher Premiums - Initial premiums are higher on permanent life insurance.
- Illiquid - Permanent life insurance should be held at least 10 years to balance the internal expenses, including cost of insurance as well as administrative and sales charges.
