What Is Permanent Life Insurance and Why Is It an Asset?

Permanent life insurance policies provide safety and security for not only you but your loved ones as well. This article will explain several reasons to buy permanent life insurance and protect your future.

Permanent life insurance protects you throughout your entire lifetime. You are covered as long as your premiums are paid. The policy pays a death benefit immediately after your passing. Permanent life insurance policies also include a savings element that allows the cash value to accumulate on a tax-deferred basis. You have the option to withdraw or borrow money from your policy once the value is large enough. If you have a policy with a mutual life insurance company, you may receive dividends. Mutual life insurance companies provide dividends that you can use to accumulate cash, pay some premiums, or purchase more coverage. Here is a look at some additional reasons to buy permanent life insurance.

  • Unique Features of a Permanent Life Insurance Policy 

When you purchase permanent life insurance, you have the option to lock in premiums. This means that your premiums will not change regardless of your health situation. As the policy builds up, you can use the cash value to pay your premiums or you can choose to take out a loan against the policy. If you choose to take out a loan, you don’t have to worry about a credit check. The cash value grows at a guaranteed rate, and you have the option to invest. In some cases, you may be able to add a term rider to your policy. This gives you the option to add more coverage during years when your financial circumstances have changed.

  • Tax Benefits of Permanent Life Insurance 

As you research life insurance in Columbia County NY, remember that the death benefit is paid to your beneficiary without any income tax. If you receive dividends as part of your policy, the amount is not taxed unless the amount you’ve accumulated is higher than your premiums. If you opt to take a loan, you will not be taxed as long as the policy remains active.

  • Costs of Permanent Life Insurance 

Since the insurer is obligated to pay a death benefit to your beneficiaries once you have passed away, permanent life insurance rates are fairly high. You have multiple options regarding how you’d like to buy permanent life insurance. You can opt to purchase the coverage every month or for a specified number of years. You may also choose to pay until you reach a certain age or opt for a lump sum payment. If you purchase coverage at 30 years old, you’ll pay annual rates of around $3,400. That number increases as you age and attempt to buy permanent life insurance. The more money you pay at the start of your policy, the higher your cash value should become. Keep a constant eye on the cash value to make sure that it’s achieving the projected return.

Underwriting is another variable to consider. If you decide to go with a full underwritten policy, you’ll have to undergo an exam but you’ll save money on premiums. If you purchase permanent life insurance without the medical policy, the premiums are more expensive and you’ll also have a limited death benefit.

  • Different Types of Permanent Life Insurance 

Universal Life Insurance 

Universal life insurance allows you to adjust your premiums and death benefit. The policy provides the flexibility to adapt as your financial situation changes. You can combine the cash value with the death benefit to create a larger payout for your beneficiaries.

Whole Life Insurance 

Whole life insurance policies normally pay up to age 100. They are often available in 10-year intervals. Your beneficiary will receive the face value of the policy.

Variable Life Insurance 

Variable life insurance allows you to put your cash value into an investment account. The insurance company would then manage your assets. Variable life policies are a little risky because there is a chance your investments could negatively impact the value of your policy.

Variable Universal Life Insurance 

Variable universal life policies allow you to adjust the premium payments at any time. However, the cash value in your policy may fluctuate based on the strength of your investments.

There are several reasons to buy permanent life insurance. One of the most important reasons being it helps ensure that your loved ones are taken care of after you have passed away.  Do you have more questions about finding the right, affordable life insurance policy? Talk to the team at Kneller Agency today to get started on your tailored coverage that can help your family through the toughest of times.

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