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What You Need to Know About Permanent Life Insurance

Life insurance comes in two faces. The more common term life insurance provides coverage only for a set period of time, while permanent life insurance protects you for life. Although the latter has this seemingly obvious advantage, there are things that you should be aware of permanent life insurance.

It can be much more than you need

The lifetime coverage offered by permanent life insurance truly makes it a more attractive option than its term life opposite at first glance. Who doesn’t want to get lifetime protection right? But looking at life insurance’s ultimate purpose, which is to provide financial support for your dependents in the event of your passing, permanent life can be so much more than what you actually need. You must determine for how long your family will depend on you financially, and typically, a term life insurance can provide just the right amount of coverage that they need. After a certain number of years, your children would have finished school, found a job on their own, and won’t be depending on you financially anymore. Meanwhile, you and your spouse would have reached retirement age, each receiving retirement and social security benefits. This means that after a set period, all of your loved ones are financially capable to survive even if you die, and term life insurance has served its purpose.

It is an uncertain form of investment

True that no investment doesn’t pose a risk, but if you’re looking to buy permanent life insurance for the sole purpose of having an investment at the same time, then think again. While the cash-value feature of permanent life insurance allows you to choose fixed premiums and minimum growth on your investment, you can also raise or lower your premiums, which can affect the balance on your cash-value. Although this may seem flexible, you actually have little control on how the cash-value balance grows. If you lower your premiums, the amount in your cash-value account may be deducted. If this cash-value reaches zero, you’ll have to pay for the full amount of your premiums, otherwise you could lose your policy.

It can be hard to sustain for long

Basically, permanent life insurances are more expensive because of the lifetime coverage and cash-value it offers. Most of the time, your insurance provider will take a portion of your premiums and invest only what’s left of it. In addition, it may take at least 12 to 15 years before your permanent life policy matures, in which case you won’t get any return on premiums before that time. If you are already struggling to pay for your premiums in the early years of the contract, you may find it even more difficult in the later years, and if you lapse, you could lose your policy and all that money could go to waste.

These things aren’t meant to drive you away from choosing permanent life over term life insurance. However, understanding them early can help you determine what you need included in your policy.

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