Permanent Insurance

Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time.

Permanent policies are known by a variety of names: whole, ordinary, universal, adjustable, or variable life. Most have a feature known as "cash value" or "cash surrender value." This feature, not found in most term insurance policies, provides you with some options. You can cancel or "surrender" the policy, in total or in part, and receive the cash value as a lump sum. If you surrender your policy in the early years, there may be little or no cash value.

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Whole Life or Ordinary Life: This is the most common type of permanent insurance. It offers a death benefit along with a savings account. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.

Universal Life or Adjustable Life: This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money-market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments - providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you should keep in mind that if you stop or reduce your premiums and the accumulated savings are used up, the policy might lapse and your life insurance coverage could end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.

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Variable Life: This policy provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward--stocks, bonds, combinations of both, or accounts that guarantee interest and principal.

Variable-Universal Life: If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.

With all types of permanent policies, the cash value of a policy is different from the policy's face value. The face amount is the money that will be paid at death or policy maturity. The cash value is the amount available if you surrender a policy before its maturity or before your death.