Permanent Life Insurance is life insurance designed to last a lifetime. Most permanent policies build cash value and stay in force for life. Premiums are higher than term insurance but policies build equity and coverage is guaranteed longer.
There are 3 major types of permanent life insurance:
- Whole Life Insurance – these policies have a fixed lifetime premium and death benefit. The policy builds cash value based on a set schedule that is printed in the policy. Some whole life polices pay dividends that can be received in cash or reinvested into the policy
- Universal Life Insurance – these policies have a flexible premium and flexible death benefit. The policy builds cash value based on current interest rates. The interest rate the policy earns is set on an annual basis. The insured pays the premium, the insurance company deducts a cost for insurance plus administrative costs and deposits the balance into an account that earns interest.
A common thread of permanent life insurance policies is cash values grow without current income tax. Insurance benefits are paid out to beneficiaries’ income tax free. Life Insurance is not subject to PA Inheritance Tax and does not go through probate.
We recommend most clients carry some level of permanent insurance. As independent brokers, we research available policies to find the most appropriate coverage. Finding the right type of coverage for the best possible price is extremely important since the premium will likely be paid for a number of years.