Note: Any reference to the word guarantee is based on the claims paying ability of the underlying insurance company.
Permanent life insurance provides lifelong protection and is known by a variety of names. These policies are designed and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, it could be the wrong type of insurance for you.
Most permanent policies including whole, ordinary, universal, adjustable and variable life have a feature known as "cash value" or "cash surrender value." This feature, which is not found in most term insurance policies, provides you with some options:
What are the Types of Permanent Insurance?
There are many different types of permanent insurance. The major ones are described below:
Whole Life or Ordinary Life
Universal Life or Adjustable Life
Variable Universal Life
Advantages and Disadvantages of Permanent Insurance
Permanent Policy - Points to Consider
What does the policy illustration show?
An illustration shows policy premiums, death benefits, cash values and information about other items that can affect your cost of obtaining insurance. Your policy may provide for dividends to be paid to you as either cash or paid-up insurance. Or it could provide for interest credits that could increase your cash value and death benefit or reduce your premium. These items are not guaranteed*. Your costs or benefits could be higher or lower than those illustrated, because they depend on the future financial results of the insurance company. With variable universal life, your values will depend on the results of the underlying portfolio of investments.
Some figures are guaranteed* and some are not. Remember that the insurance company will honor the guaranteed* figures, subject to its financial strength.
If your policy is a variable universal life policy, be sure that the interest rate or rate of return assumed is reasonable for the underlying investment accounts to which you choose to allocate your premiums. It is important to keep in mind that an illustration is not a legal document. Legal obligations are spelled out in the policy itself.
Here are additional questions to ask about the policy illustration:
Here are a few tips to keep in mind when purchasing a life insurance policy:
Here are some additional items to consider when you are selecting a term or permanent policy:
*Guarantees are based on the claims paying ability of the issuing insurance company.
** Availability, specifics, and costs of these riders vary by carrier and state