what urban must know

Permanent life insurance as the name indicates is an insurance policy that does not have a set end date.

There are 2 main types of permanent life insurance, Variable and Whole life insurance policies.

Variable insurance policies are usually tied to the stock market through a combination of mutual funds and other investment tools.

Whole life policies are on a “fixed” schedule based on more conservative interest rates linked to the fed’s rates.
A feature of a permanent life policy is that in addition to the death benefit, the policy accrues cash value, this cash value can be used in different ways, you can borrow against it, and then repay it with whatever the interest rates are set by the issuing insurance company, or you can take it and not return it but it could impact the death benefit. Cash value can also be used to either supplement your premiums later on in life or altogether cover your premiums.

At time of death, in addition to the death benefit, your beneficiary will also receive whatever the cash value was accrued during the life of the policy.

Although a very good policy to have, since as long as you pay the premiums you will always be insured (so permanent life is guaranteed to pay off), permanent life insurance can be cost prohibitive, so term life might be a more effective option.

I’ve always believed in a healthy mixture of both types of policies, look at your insurance needs and then look at when those needs decrease in time, and use a term policy to cover those immediate needs, and use a permanent policy as an add on to provide long term coverage.

This entry was posted on Monday, January 18th, 2010 at 6:51 am and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.