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PERMANENT LIFE INSURANCE
Permanent life insurance policies protect the owner
for as long as the premium payments are made. Permanent life insurance
policies offer fixed or flexible premiums, guaranteed or non-guaranteed
clash of values which accumulate as a result of the premium and investment
performance. Some permanent policies offer policy dividends.
They are four types of permanent insurance policies:
Whole Life insurance Policy (aka traditional):
provides a lifetime protection for as long as the preview and are paid.
As premiums are paid, the life contract develops cash
value. These values accumulate in the early years so that in later years
enough money would have accumulated in the cash-value to pay the promised
death benefit and keeping the premium leveled.
The policy owner agrees to pay level premium amount generally to age
100, in return, the insurance company agrees to pay the beneficiary
a fixed and death benefit when the insured prematurely dies.
Policy owners who wish to terminate their policies are entitled to
scheduled cash surrendered a value.
Variable Whole life insurance policy: Is
a whole life insurance policy whereby the policy owner dictates where
the fund in the cash-value is to be invested among several separate
accounts. The cash value in those separate accounts is based on the
market performance of the assets in those are separate accounts. The
policy owner bears all the investment risk associated with those of
separate account.
Death benefits may increase or decrease, but not below
the guaranteed a minimum.
Universal Life Insurance Policy UL (aka Flexible
Premium): is a permanent policy that allows of the flexibility
to adjust the premium payments. The premium payments can be made from
month to month within limits, and the premiums and can even be skipped
as long as the cash-value sufficient to cover the policy monthly charge.
If the premium payments have been skipped too many
times, and fall too low when compared to the policies cash-value, the
policy may be in danger of lapsing.
Most universal life insurance policies offer two types
of death benefit the options
 Option
A: Fixed (level) death benefit option stays in level for the term of
the contract.
Option
B: Is equal to the specified level of pure insurance plus the policies
cash value at time of death, thus, the death benefit increases as a
cash-value increases as well.
Variable universal life insurance policy VUL: is
a universal life insurance policy whereby the policy order dictates
where the fund in the cash-value is to be invested among several separate
accounts
Under Option B, the death of benefit will vary directly with the change
in cash-value.
Since variable life and variable universal life are
considered securities, coliseum owners must be given a prospectus. In
addition, when proposing VL or VUL, a suitability report must be completed
to make sure that the policy owner has a basic understanding of investment
and is capable of making good investment decisions.
Contrary to universal life and a whole life when dealing
with Variable Life and Variable Universal Life, the policy owner must
be willing to bear the entire risk of investment since the cash-value
is not guaranteed.
Advantages of Permanent Life Insurance
Protection
for as long as the premiums are paid
Premiums
can be fixed or flexible to meet the premium payer financial wishes
Policy
accumulates cash value that in-turn can be borrowed against
Cash
value can be surrendered in part or in total, or provide income at retirement
Disadvantages of Permanent Life Insurance
If
not kept the long enough, permanent life insurance can be more expensive
than term life insurance
Cost
of required premium may make it harder financially to purchase additional
insurance.
Surrendering
the policy within the 5-10 years, may result in great lost on the part
of the policy owner.
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