Permanent Life Insurance or Term: What's the Best Future Investment?
Permanent life insurance builds cash value and offers lifelong coverage, but the high cost of premiums usually means it’s not a good option for most people.
Best Permanent life insurance
Deciding on the perfect life insurance according to your needs is a difficult job. If you are planning to get life insurance coverage, you are torn between two possible options.
First is the permanent life insurance plan like universal life that can offer investment along with security in a time of death. Another option is the Term life plan that can provide coverage for a limited time, but an inexpensive choice.
With overwhelming options and information from various insurance carriers, you may find yourself questioning the possibility of getting a high investment return. It is good to gain some knowledge with the right information to guide you to the best life insurance coverage.
Permanent life insurance pros and cons
Overwhelming experience is part of the process as you shop for your future life insurance that will best suit your needs. There are only two options for you.
You can either choose a permanent life insurance plan or a term plan. Before you make a decision, you need to find out how each option can help with your future financial needs and goals. Also, it is helpful to dig deeper into each policy to know what it can offer.
With Term plans, beneficiaries are secured in case of the insured’s untimely demise, but it will not accumulate any cash value and without any investment. You can only benefit from it if you pass away before the term expires.
In case nothing happens within the period before it expires, then you only get peace of mind that you are healthy and safe.
Policyholders of term life plans can get a coverage limit of 10, 20, 30, and 40 years. However, as you get older, the more expensive monthly premiums you need to pay become. Overall, this is very affordable insurance, especially for younger ones.
For instance, a 30-year-old male non-smoking insured can get $200,000 in insurance coverage for 15 years with no medical examination as a requirement and pays less than $18 dollars per month.
Permanent life insurance policies or cash value policies can offer payout in case of the insured’s death and investment that incurs cash value over time.
Insurance agents can provide different policies like universal, whole life, or variable life insurance policy. All of these options offer an investment feature. Many financial experts don’t like using permanent life insurance as an investment.
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Types of Permanent life insurance
There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.
1. No one wants to give a financial burden to their family after death. If you belong to a group of people who earn enough for their living expenses with a little money to spend on life insurance, you better get one.
An affordable policy can cover final expenses once you passed away. This coverage is beneficial to cover burial expenses and other bills.
Most of these plans are designed for older people, so age will not hinder you from getting the coverage that you need. Most of these policies can only offer lower death benefits than a typical term life policy.
For instance, a 60-year-old with no health issue may pay 42 dollars as a monthly premium and will get 10,000 dollars for their coverage.
2. Another individual who needs to acquire life insurance is if a family member depends on them. Suppose someone depends on you for financial support, whether spouse, children or older parents, it is vital to safeguard them in case of your death.
Financial expert’s advice is to purchase insurance coverage that can cover five to ten times your annual income in term life insurance.
3. The third group of people who need to buy life insurance has a medical family history of dreaded diseases. An essential part of getting insurance coverage is disclosing your medical family history during the underwriting process.
It is good to apply for life insurance earlier before you begin experiencing similar ailments. If you have a family history of diseases like cancer, heart problems, or diabetes, it is good to buy coverage.
4. The last are those who own estates that exceeded the threshold for the federal estate tax. If you think you are under this category, it is useful to get a permanent life insurance plan. This plan’s beauty is that it can reduce estate value, and you will get tax free death benefits.
Is permanent life insurance worth it
Setting aside all fees and commissions, it is true that permanent life insurance policies are advantageous to many people. If you think that you may not renew term life coverage in the future because of possible health conditions and other factors, it is good to get a permanent life insurance policy.
As its name implies, permanent life insurance policies are permanent, and once it is granted to you, an insurer will not be able to change any details within the policy.
This policy is the best option if you want to include the predictability of long-term healthcare expenses. When infused with some care riders, the permanent life insurance policy has a beneficial tax advantage.
People who want to get Medicaid subsidies can opt for whole life coverage. Assets from this type of trust will not disqualify you from Medicaid eligibility. You can use it to transfer your wealth to heirs, with a steady income, and cover final expenses.
If you are an investor with a very high net worth, you may also benefit from acquiring cash value insurance to avoid estate tax. If you are a couple with a net worth of 10 million dollars, then you need to pay 40 percent for every dollar for estate tax by the time you passed away.
A lot of your hard-earned money, while you are alive, will be used to pay for estate taxes, which is unfair for many. Many states have independent estate taxes. Although there are fees and expenses associated with acquiring cash, value savings is still something to consider.
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Permanent life insurance investment
With a permanent life insurance plan, the concept is investing a portion of your premium to a cash-value account, and it will grow through dividends that will increase its worth over time.
Permanent life insurance policies with sufficient cash value allow insureds to apply for a loan from their cash value. Just like other loans, it will incur some interest that is paid through the account.
Your beneficiaries will get less than the money you expected in case of an outstanding loan, and your death benefit will also reduce. It can happen once you die, and the policy does not reach the maturity stage.
The only way to get funds is to borrow from your cash-value account. You may also choose to cancel the policy, but some termination fees are higher for less mature policies.
Permanent life insurance cash value
The cash value from a permanent life insurance policy is very beneficial for those who want to fund huge expenses like nursing home care or long term care.
The high cash value can support several years of long term care. This benefit is essential for those with a family medical history that may need long term care in the future.
Another benefit is to get cash value from your investment if you are experiencing financial challenges like the considerable estate tax, support to educational needs, financial support to a child with special needs, or fund a new business venture.
However, if you have minimal funds to pay for a high monthly premium for a permanent life insurance policy, it is better to choose affordable options like the term life insurance.
Get a life insurance policy that is according to your financial ability, lifestyle, and future needs. If term policy is what you can afford today, you may also change it to permanent life insurance in the future.
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About Coach B.
After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.
In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.
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