Permanent life insurance
Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value. This is compared with Term life insurance where insurance is purchased for a specified period (typically a year, or for level periods such as 5, 10, 15, 20 even 25 and 30 years) where a death benefit is only paid to the beneficiary if the insured dies during the specified period. Permanent life insurance originally was offered as a fixed premium fixed return product known as whole life insurance also known as cash surrender life insurance. Variable universal life insurance combines this with the flexibility in premium structure of universal life to create the most free form option for consumers to manage their own money (at their own risk).Because of this, permanent premiums remain 8 to 10 times more expensive than term premiums for the same coverage. . Variable universal life insurance policies are considered more favorable to other permanent life insurance alternatives due to the favorable tax treatment of all permanent life insurance policies and their potential for greater returns than other permanent life insurance products. Because permanent life insurance programs are designed to be permanent and pay a death benefit, the cost of insurance is considerably higher than term insurance.
Universal life policies retained the fixed investment performance of whole life policies. Term insurance is referred to as pure death benefit with no cash accumulation vehicle tied to it.
Consumers later wanted more flexibility which was offered in the form of universal life insurance. Universal life insurance allows consumers flexibility in when premiums are to be paid and the amount that they would be.
Variable life insurance follows the mold of whole or universal life, but it shifts the investment risk to the consumer along with the potential for greater returns. Universal life policies also allowed consumers to permanently withdraw cash from the policy without the interest associated with the loan provisions in whole life policies.
This offered consumers guaranteed cash value accumulation and a consistent premium.
