Permanent insurance offers lifelong protection and you can accumulate cash value on a tax-deferred basis. This cash account can be used for a variety of purposes from helping you out of a tight financial spot, to providing funds to take advantage of an opportunity, to supplementing your retirement income. Initial premiums are considerably higher than what you would pay for a term policy with the same face amount.
It also offers the certainty of a guaranteed minimum death benefit as long as your premiums are sufficient to sustain it. If you do not maintain the minimum premiums, your death benefit can be reduced. Variable universal life premium payments are also adjustable, subject to the minimum needed to keep the policy in force, and you can allocate them among investment sub-accounts that offer varying degrees of risk and reward.
There are several types of life insurance covers that are available in several companies. These are:
Whole life insurance is the priciest of the three principal types of life insurance (term, whole, and universal), but it guarantees a death benefit, guarantees a cash value growth rate, and guarantees a fixed premium. Buyers are attracted to the guaranteed death benefit and the minimal risk of lapse. Unlike universal life insurance (the other variety of permanent life insurance) in order to prevent this policy lapsing, the policy owner has only to make regular payments of a fixed premium, just as though this were a simple term life insurance policy.
Universal life insurance is permanent life insurance, which offers the policyholder the most flexibility but also requires the most vigilance in order to keep the policy on track. It is more expensive than term life insurance but less expensive than whole life insurance. With universal life insurance, there is no set schedule of payments and the growth of cash value is not fixed. In order to ensure that the policy remain in force, the policyholder must attend to the amount of cash value saved up and at all times maintain enough to meet the insurer's charges.
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