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Life Insurance 101: Types of Permanent Life Insurance

Life Insurance 101: Types of Permanent Life Insurance

Everyone please take your seats. There will be plenty of time to talk with your friends after class. Today, I will highlight some of the different types of permanent life insurance. We have a lot to go through in one short class period. So, please pay close attention and don’t disrupt unless you have a serious question.

What Is Permanent Life Insurance

For those of you who missed last week’s class, a permanent life insurance policy is effective throughout your life. It never expires unless you stop making payments or cancel the policy. Compared to term life insurance, they have higher premiums, but they do accumulate cash value throughout the life of the policy. These cash values are tax-deferred and are often used for retirement savings and making major purchases.

There are too many kinds of permanent life insurance policies to cover in one class. We will be focusing on some of the most common types.

Whole Life Insurance

Whole life insurance policies are among the safest and most reliable permanent life insurance products. Whole life offers a guaranteed death benefit that will not fluctuate. It also features a guaranteed rate of return. The cash value of a whole life policy grows at a predetermined rate. It is guaranteed to accumulate over the course of the policy.

Variable Life Insurance

Variable life insurance is so named because it varies. It is offered via a prospectus. Cash value and death benefits depend on the performance of an investment portfolio. You can invest in stocks and/or bonds. Variable life insurance comes with higher risk. Poor portfolio performances can decrease death benefits and cash values. It also has higher rewards. A variable life policy can greatly outperform whole life policies with wise investments.

Universal Life Insurance

Universal life insurance offers more flexible premium payments. You can pay more when you have cash at hand and less at other times. You also have the ability to pay when you want. Universal life policies also offer the ability to adjust death benefits with greater ease. Like whole life, universal life insurance usually features a guaranteed rate of return on your cash value.

Variable Universal Life Insurance

As the name suggests, variable universal life insurance combines variable and universal features. These are the most flexible policies. You have the option to have some control over your payments, while also utilizing an investment portfolio. Since you have the options of paying higher premiums, you can grow your investments faster. You can also skip the occasional payment when times are tight.

Thank you for your attention. That was a lot to get through in one class. There are many other types of permanent life insurance policies. Going through all of them would take the entire semester. Any questions?

Yes. We will be going back to term life insurance. Make sure to do the reading on term life options in your text to prepare for next week.

Class is dismissed.

Life Insurance 101: Types of Permanent Life Insurance
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