Permanent life insurance is life insurance that is designed to pay a death benefit when you die no matter how old you get. Some permanent life insurance is contractually guaranteed to last until you die while other permanent life insurance may or may not if you don't manage it properly.
- Whole Life
- Universal Life
- Variable Life
- Second To Die (Survivorship Life Insurance)
Whole Life Insurance
- Ordinary whole life insurance Ordinary whole life insurance pays no matter how old the insured gets as long as the premium is paid.
- Endowments An endowment pays the face amount if the insured dies or lives to a specific age. An endowment at age 95 would pay the face amount when the insured died or if the insured didn't die, the insurance company would pay the full value of the policy when they reached the age of 95.
- Limited pay life insurance Limited pay whole life insurance pays the face amount if the insured dies no matter how old they get. The premiums would only be paid for a part of the insured's life. An example would be 20 pay life insurance. In that example, the premiums would be paid for 20 years and then the policy would be paid up or paid for and no other premiums would be due.
Universal Life Insurance
Insurance companies responded by creating universal life policies that were tied to short term interest rates. This allowed for policyholders to take advantage of the high short term interest rates of that era.
TIP! If you own a universal life insurance policy, one thing you'll want to do is keep on top of the value inside the policy each year compared to the illustration you received when you bought it. If you see the cash value is where it supposed to be each year, then that's great. If you don't, and the actual value of your policy is less than what was illustrated, then your policy is in danger of lapsing at some point. You'll want to work closely with your agent to make sure it's funded properly. The problem is that most people don't take the time to do that and find out when it's to expensive to catch it up. The result is they let the policy lapse.
Variable Life Insurance
NOTE: Just like universal life insurance, as long as you understand how these sophisticated policies work and you keep track of the values each year to make sure it's properly funded, you'll be fine. But if you don't pay attention or understand your policy, then just like my mom, you could pay all of your premiums on time yet still lose your policy.