What is permanent insurance and how does it work?

What is permanent insurance?

Permanent insurance covers you for your entire life. There are four types of permanent life insurance to compare; term to 100 life insurance, whole life insurance, universal life insurance and participating life insurance.

Term to age 100 and universal life insurance minimum premium payable, include no savings component. Should you terminate your insurance coverage, you receive nothing in return.

A few things to discuss with your financial advisor when you choose Whole life participating polices and Universal life target premium payable.

Premiums
Whole life premiums are usually paid for your entire life. You can also customize premiums to pay-off the insurance, for example in 10 or 20 years.

Universal life insurance target premium payable, offers you a lifetime coverage along with investment options. The target premium is composed of the premium required to maintain your life insurance coverage and the amount invested in the savings component.

Mix of death benefit and cash value
Upon death, your beneficiaries will receive the total death benefit which is equal to the sum insured plus the accumulated amounts in the savings component, tax-free.

Cash value growth
The cash value is an important feature of a whole life policy. Policies can be structured to let you choose how quickly your cash value grows, so the cash value will be there for you to access if you need it.

Are you looking for lifetime coverage at fixed rates without a savings component? Are you considering permanent life insurance including a savings feature?

What are the many benefits of permanent insurance?

A blanket for life

• Your insurance has no expiry date. Permanent insurance covers you for your entire life. No need to renew your policy or worry about it expiring!

A tax-free insured capital

• Your beneficiaries receive the death benefit money. For example, they can pay debts, the mortgage, current expenses, and more.

Cash value

• Grow your money with cash value. Some types of permanent insurance include a savings component called cash value. This can help you earn interest in a tax-efficient way. This means you won’t pay tax on interest earned until you withdraw funds.
• So you can grow your money over time! You can also borrow against your cash value or withdraw some of it. Please note that a withdrawal of the policy’s cash value may reduce the amount of the death benefit.

Fixed premiums

• Your insurance does not have an expiry date. Some insurance contracts (such as term life insurance) provide coverage for a certain number of years. But permanent life insurance covers you for the rest of your life. No need to renew your contract or worry about it expiring!

Let’s compare 4 types of permanent life insurance?

There are 4 types of permanent life insurance to consider:

• term to age 100 also referred to as T100
• universal life insurance minimum premium chosen
• whole life non participating policy
• whole life participating policy

What’s the difference between permanent life insurance and term insurance?

Term to age 100 and Universal life insurance minimum premium offer no savings component.

If you surrender the policy, you will get nothing in return. These insurance policies offer lifetime coverage at the lowest rates.

Universal life insurance target premium is structured to take advantage of the investment component. A participating whole life insurance policy offers lifetime insurance and the potential to receive dividends . They provide you with the features to protect what’s important to you and grow your money at the same time.

Target Premium Universal Life Insurance

It’s guaranteed lifetime protection that lets you invest and build your wealth – and it’s one of the most flexible and affordable products available that covers you for the rest of your life.

A universal life insurance policy is a combination of permanent life insurance and an investment account that accumulates tax-free if properly established.

How does universal life insurance work?

• You pay a premium for your insurance coverage called the “minimum premium”.
• Once you’ve covered the insurance costs, if you choose, the extra amount of money goes to the investment component of the policy.
• The money goes to the investments of your choice in accordance with your investor profile which assesses your risk tolerance.
• You can access the money in your account to use it as you wish, as long as there is enough money left in the account to cover insurance costs.
• The amount withdrawn is taxable.
• You name the beneficiaries who will receive your insurance money when you die.
• On death the amount paid is equal to the sum insured plus the amount of the accumulated investment and will not be taxable.

Borrow from your universal life insurance policy.

• Borrow money with interest on the cash value of your contract. You can as long as there is enough money in the cash values.
• Your cash value continues to grow as if you hadn’t withdrawn the money.
• The minimum loan from many insurers is $500.
• You can repay the loan at any time. The loan will be subject to an interest rate set by the insurance company on each policy anniversary.
• You don’t have to qualify for a loan as long as the money is within cash values. After all it’s your money.

Participating whole life insurance explained.

• A participating life insurance policy that pays the beneficiaries of your choice an insurable and tax-free sum upon your death.
• Your policy is guaranteed to grow in cash value as long as you pay your premiums.
• The cash value is the value of the insurance policy that you can access in cash.
• Your insurance payment is reduced when you access your cash value.

Ideal for young people who want a limited payment plan such as 20 years and who will be eligible to receive dividends annually (if declared) as long as the policy remains in force.

• Your payments are pooled in a separate account called the participating account with other policy owners.
• Funds are professionally managed
• According to the annual financial statement the company may pay you a dividend.
• Note that most participating policies have paid dividends every year since inception, but there are no guarantees.

How it works?

• Pay your premiums and the cash value of your policy grows tax-free, within certain limits.
• Your payments are made to the participating account which is managed by the insurer.
• This money is used to pay expenses, taxes, insurance claims, etc.
• You may receive dividends each year based on the performance of the participating account.
• Several Options: You can take your dividend in cash, buy additional insurance or pay your insurance premium. When you die, your beneficiaries receive a tax-free payment.

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Want to learn about policy features and numerous advantages of term life insurance?

Click on the link below provided below to learn more;

What is term life insurance and which policy features should be included free of charge

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