What is permanent life insurance?
What is permanent life insurance? Permanent life insurance provides life insurance coverage your entire life. In addition to life-long coverage, you can save money with a life insurance savings account that accumulates over time and builds interest. Some permanent life insurance policies even allow you to invest in stocks and bonds. Permanent life insurance is $85 on average, but you can get cheaper rates. Shop around and compare multiple insurance companies to get the best deal on permanent life insurance rates.
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Laura Kuhl
Managing Content Editor
Laura Kuhl holds a Master’s Degree in Professional Writing from the University of North Carolina at Wilmington. Her career began in healthcare and wellness, creating lifestyle content for doctors, dentists, and other healthcare and holistic professionals. In 2018, she started writing for the cannabis industry. She curated news articles and insider interviews with investors and small business ...
Managing Content Editor
UPDATED: Jan 8, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jan 8, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Permanent life insurance provides coverage for your entire life
- Most permanent life insurance policies have life insurance coverage and a cash value account
- Variable life insurance policies allow you to invest your cash value into various markets
Did you know you can use permanent life insurance as an investment in addition to life insurance coverage? Permanent life insurance has several perks you can take advantage of while ensuring the financial well-being of those closest to you.
But which permanent life insurance is best? And where can you buy permanent life insurance? Don’t worry, we’re here to answer all your questions about permanent insurance.
Our article breaks down all the details about permanent life insurance, different types of permanent life insurance, and sample life insurance rates.
Continue reading to learn more about permanent life insurance. Enter your ZIP code if you’re ready to compare multiple insurance companies in your area.
What is permanent life insurance?
Permanent life insurance provides life insurance coverage for your entire life. In addition to life insurance, you’ll have an account that accumulates cash.
So how does a permanent life insurance policy work?
Permanent life insurance is like any life insurance policy, it provides death benefits (policy amount) to beneficiaries after you pass away. As you pay life insurance rates per month, a portion of your life insurance payment goes into an accumulated cash value.
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How many types of permanent life insurance are there?
Multiple types of permanent life insurance policies are available at various companies across the United States. Each permanent life insurance is similar, but they have something unique.
Here’s a list of permanent life insurance policies you might see at different companies.
- Whole life insurance
- Guaranteed acceptance life insurance
- Variable life insurance
- Variable universal life insurance
- Indexed universal life insurance
The best permanent life insurance companies provide several options for life-long coverage. But policies like variable life insurance work differently than whole life and universal life insurance.
How does whole life insurance work?
Whole life insurance is a standard life insurance policy with death benefits (policy amount) and an accumulated cash account (savings account). You’ll pay specific life insurance rates that contribute to life insurance coverage and the savings account.
What is guaranteed acceptance life insurance?
A guaranteed acceptance life insurance (GI life insurance) policy is a whole life insurance policy with no medical exam and no medical questions. In addition to skipping health checks, your policy amount is much lower than a standard whole life insurance policy.
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What is a variable life insurance policy?
Variable life insurance is like a whole life insurance policy, but the life insurance company allows you to use your savings account to invest in stocks and bond mutual funds. As the policyholder, you’ll be responsible for gains and losses on your investments.
How are universal life insurance policies different?
Universal life insurance policies provide life insurance coverage and a savings account like most permanent life insurance plans.
But universal life insurance policies allow you to adjust your monthly rates by using your accumulated cash. However, you must have enough saved up in your life insurance account to influence your universal life insurance policy.
Variable universal life (VUL) insurance combines the perks of variable and universal life insurance. Meanwhile, indexed universal life (IUL) allows the life insurance company to choose investments for you, and it provides the same perks as a universal life insurance policy.
What’s the difference between permanent life insurance and term life insurance?
Permanent life insurance lasts your entire life, but term life insurance lasts for a few years. Your term insurance length depends on which policy type you’ve chosen. Most life insurance companies provide term lengths from five years to 30 years.
The higher the term length, the more you’ll pay for life insurance per month. Also, term life insurance doesn’t provide investments or savings accounts.
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Can you borrow from life insurance?
Yes, you can. One of the best benefits of permanent life insurance is borrowing against your death benefits or accumulated cash value account. Using your life insurance savings to get a loan or supplement an investment is a strategy known as infinite banking.
If you pay back your loan before you pass away, your policy amount won’t be affected. Failing to pay back into your death benefits could affect the life insurance payout to beneficiaries after you pass away.
A surrender cash value is the amount of money you receive after the life insurance company subtracts fees from your accumulated cash value.
However, you can borrow from your accumulated cash value or make a withdrawal from your life insurance account. If you take out the total amount, you won’t get the entire balance of your accumulated cash value. You’ll receive the surrender cash value from the life insurance company.
Are permanent life insurance earnings taxable income?
It depends. According to the Internal Revenue Service (IRS), the death benefits you receive from a life insurance payout aren’t part of your gross income. But any interest you get from a life insurance policy may be considered taxable income.
For example, the cash surrender value (also called surrender cash value) or earnings from investment could be taxed by the IRS. Be sure to see a tax professional about sticky situations where earned interest affects a policy amount.
How much are permanent life insurance rates?
Permanent life insurance quotes are based on your age, health, gender, policy type, add-ons (riders), and the policy amount.
Average Monthly Term vs. Whole Life Insurance Rates
| Policyholder Age & Tobacco Use | Average Monthly Term Rates: Male | Average Monthly Term Rates: Female | Average Monthly Whole Rates: Male | Average Monthly Whole Rates: Female |
|---|---|---|---|---|
| 25-Year-Old Non-Smoker | $15 | $13 | $94 | $85 |
| 35-Year-Old Non-Smoker | $15 | $14 | $128 | $113 |
| 45-Year-Old Non-Smoker | $22 | $20 | $191 | $243 |
| 55-Year-Old Non-Smoker | $44 | $34 | $295 | $422 |
| 65-Year-Old Non-Smoker | $106 | $73 | $528 | $204 |
| Average Annual Rates for Non-Smokers | $40 | $186 | $247 | $204 |
| 25-Year-Old Smoker | $27 | $21 | $116 | $107 |
| 35-Year-Old Smoker | $30 | $24 | $157 | $146 |
| 45-Year-Old Smoker | $53 | $41 | $224 | $206 |
| 55-Year-Old Smoker | $114 | $83 | $350 | $321 |
| 65-Year-Old Smoker | $270 | $186 | $600 | $204 |
| Average Annual Rates for Smokers | $99 | $71 | $289 | $253 |
We compared term vs. permanent life insurance and found that term life insurance is much cheaper. Whole life insurance cost is more expensive, but it provides more.
Younger people are likely to get affordable permanent life insurance, but seniors pay more expensive rates. However, there’s a way to get a deal on life insurance if you shop with the right company.
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What are the best permanent life insurance companies?
Before you buy permanent life insurance, you should know about the best life insurance companies in the United States. Let’s examine America’s top life insurance companies based on market share and yearly earnings.
Top 20 Whole Life Insurance Companies by Market Share
| Companies | Direct Written Premium | Market Share |
|---|---|---|
| Northwestern Mutual | $10,517,115,452 | 6.42% |
| Metropolitan Group | $9,821,445,953 | 6.00% |
| New York Life | $9,925,848,300 | 5.68% |
| Prudential | $9,128,805,060 | 5.57% |
| Lincoln National | $8,769,303,774 | 5.36% |
| MassMutual | $6,854,713,057 | 4.19% |
| Aegon | $4,809,856,650 | 2.94% |
| John Hancock | $4,640,905,017 | 2.83% |
| State Farm | $4,633,004,963 | 2.83% |
| Minnesota Mutual Group | $4,422,100,028 | 2.70% |
| Guardian Life | $4,033,541,401 | 2.46% |
| Pacific Life | $3,755,606,213 | 2.29% |
| Nationwide | $3,364,808,181 | 2.05% |
| AIG | $3,336,397,453 | 2.04% |
| AXA Equitable | $3,051,945,849 | 1.86% |
| Voya Financial | $2,526,828,268 | 1.54% |
| Brighthouse Financial | $2,519,733,116 | 1.54% |
| Protective Life | $2,403,640,825 | 1.47% |
| Primerica | $2,375,786,190 | 1.45% |
| Sammons Enterprises | $2,321,529,722 | 1.42% |
Although we couldn’t locate the best companies for each specific permanent life insurance type, we did find the top 20 life insurance companies that provide whole life insurance. You’ll also notice that some of these companies are connected to home and auto insurance.
You could save money if you bundle your life insurance with your current insurance company. If you can get a better deal on life insurance elsewhere, you should shop with another insurance company.
Permanent Life Insurance: What are the advantages and disadvantages?
Permanent life insurance has several perks, but you may feel the sting of some pitfalls of permanent life insurance in some situations.
Let’s look at the pros and cons of permanent life insurance:
Pros
- You can save money while getting life insurance coverage
- You’re able to borrow from your savings account
- Life insurance riders can expand coverage
- Investment opportunities
- Life-long life insurance policy
Cons
- More expensive than term life insurance
- Borrowing money from your policy could affect your death benefits
- Regular health checks to determine life insurance eligibility
- You may lose money through investments under IUL and VUL insurance
The advantages and disadvantages are almost balanced. We recommend permanent life insurance for people who have a flexible budget, especially if you’re looking to invest in something long-term. Maintaining good health is a sure way to keep your rates low, and it maximizes your benefits.
Case Studies: Utilizing Different Types of Permanent Life Insurance
Case Study 1: Whole Life Insurance for Legacy Planning
Sarah, a 40-year-old individual, wants to create a substantial financial legacy for her children and future generations. She purchases a whole life insurance policy with a face value of $1 million. The permanent nature of the policy ensures that her beneficiaries will receive the death benefit regardless of when she passes away.
Sarah also sees the cash value component of the policy as an opportunity for growth. She plans to use the accumulated cash value to supplement her retirement income in the future or provide funds for other financial goals, such as funding her children’s education.
Case Study 2: Variable Universal Life Insurance for Investment Opportunities
Michael, a 35-year-old individual, is looking for a life insurance policy that not only provides protection but also offers investment opportunities. He opts for a variable universal life insurance policy with a face value of $500,000. This policy allows him to allocate a portion of his premiums into investment accounts, such as stocks and bonds.
Michael sees this as a way to potentially grow his wealth over time while still having the protection of a life insurance policy. He regularly monitors his investment choices and adjusts them based on his risk tolerance and market conditions.
Case Study 3: Indexed Universal Life Insurance for Flexible Coverage and Potential Growth
Emily, a 50-year-old individual, wants a life insurance policy that offers flexibility and the potential for growth. She chooses an indexed universal life insurance policy with a face value of $750,000. This policy allows her to adjust her premium payments and death benefit amount as needed.
Emily is also attracted to the policy’s cash value growth potential, which is linked to the performance of a specific market index. She understands that there are limits to the potential gains but appreciates the opportunity to participate in market growth while still having the security of a life insurance policy.
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Permanent Life Insurance: The Bottom Line
Permanent life insurance is rewarding if you keep it for a long time. The accumulated cash value builds interest over time, and you can use it while you’re still alive.
Borrowing against your policy amount or savings account gives you financial options in tight situations. However, permanent life insurance is more expensive. Therefore, expect permanent life insurance costs to get more expensive as you get older.
But there’s a way to secure affordable permanent life insurance. Now that you know more about permanent life insurance policies, use our free online quote tool below to compare multiple insurance companies near you.
Frequently Asked Questions
Are death benefits considered taxable income for beneficiaries?
Generally, no. However, accrued interest or investment gains included in the death benefit may be subject to income tax.
What happens if I stop paying premiums?
If you stop paying premiums, your policy may lapse, and the death benefit may no longer be available.
Can I borrow against the death benefit?
Some policies allow policyholders to borrow against the cash value, potentially reducing the death benefit.
Are death benefits subject to inheritance tax?
Inheritance tax laws vary, but in some cases, the death benefit may be subject to inheritance tax if the estate value exceeds a certain threshold.
Can creditors claim the death benefit to cover outstanding debts?
Generally, the death benefit is paid directly to beneficiaries and is not subject to claims by creditors for outstanding debts.
What happens if the beneficiary predeceases the insured person?
The death benefit may be paid to the contingent beneficiary or the insured person’s estate if no contingent beneficiary is named or alive.
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Laura Kuhl
Managing Content Editor
Laura Kuhl holds a Master’s Degree in Professional Writing from the University of North Carolina at Wilmington. Her career began in healthcare and wellness, creating lifestyle content for doctors, dentists, and other healthcare and holistic professionals. In 2018, she started writing for the cannabis industry. She curated news articles and insider interviews with investors and small business ...
Managing Content Editor
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.