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What is Permanent Insurance?
Permanent Insurance consists of two elements: death benefit and cash value. These two elements decrease and increase in unison to always equal the death benefit's face value.
As premiums are paid, cash value increases as the death benefit decreases. This allows the flexibility to borrow against the policy for loans, educational expenses, and other investments. Borrowing against the cash value does not cancel the contract unless the loan exceeds the cash value accumulated. However, borrowing against the cash value does reduce the death benefit.
Since interest is accrued on the cash value element, when interest accrued equals the premium payment, payments are no longer necessary. Therefore, the policy will eventually pay for itself.
Permanent insurance is beneficial since the premium will never increase even though age increases and health generally deteriorates.
Options Available:
- Waver of Premium: allows coverage to continue without paying your premium if you become disabled (time restrictions may apply)
- Guaranteed Insurability: allows the purchase of additional coverage regardless of insurability.
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