Many people know how term life insurance works. But they often don’t know how permanent insurance works.
To refresh, term life insurance provides protection for a specific period of time. This is known as the “term.”
If you pass away during the term, your loved ones receive a set amount of money. This money is known as the “death benefit.” Term life insurance is an affordable option that’s especially popular among parents of dependent children.
What is Permanent Life Insurance?
Permanent life insurance offers a death benefit with lifelong protection. Additionally, it offers you the ability to accumulate cash value on a tax-deferred basis. It’s money that’s there for you whenever you need it, for whatever you need it for.
How Permanent Life Insurance Builds Wealth
Have you considered putting your tax refund toward growing your wealth? If so, you may want to consider permanent life insurance.
Marcus T. Henderson, Sr., RFP, AIF, MRFC, president and CEO of Henderson Financial Group, Inc., in Brentwood, Tenn., has been educating people about life insurance since 1989. He likens the difference between term and permanent life insurance to the difference between renting an apartment and buying a house.
“With permanent life insurance, you actually own something and have equity,” he says. “You have money to use even if the death benefit is never used.”
Marcus says countless clients over the years have tapped into the cash value of their permanent life insurance. It’s helped them buy a house, weather a financial emergency and more. “That’s especially true now with our longer lifespans—people often outlive their term insurance,” he says.
Other Benefits of Permanent Life Insurance
Permanent life insurance has other benefits beyond building your wealth. They include:
- Steady returns for peace of mind. Marcus reminds customers to compare cash value’s rate of return to savings and money market accounts’ rates of return. Cash value is almost always much higher. He also cautions against comparing that rate against stocks’ rates. While stocks can offer great returns, they are much riskier.
- Lots of policy options. Marcus says many customers falsely believe there’s only one kind of permanent life insurance. In reality, there are four types. Their main differences are whether you pay a fixed or a variable premium and how you want to invest the savings.
- Lifelong coverage. The “term” never ends on your permanent life insurance policy if you keep paying your premiums.
- Costs tend to go down over time. Marcus reminds customers that permanent life insurance typically costs less the longer you own the policy. “There even comes a point where the policy starts to pay for itself,” he says.
- Living benefits. Many permanent life insurance policies let you customize your coverage so you can benefit from them while you’re still alive. They include:
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- Critical care coverage in case you ever incur costs after a health crisis.
- Long-term care coverage in case you ever need home health care, nursing home care or personal or adult day care.
- An accelerated death benefit that lets you tap into money from the death benefit if you have a terminal illness.
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Consider a Term to Perm Policy
Some term life insurance policies give you the option of converting them into permanent life insurance policies later on.
Marcus often recommends “term to perm” policies to his clients. A big reason why is that poor health in the future could prevent you from getting permanent life insurance. “Term policies with the option to convert let you get permanent insurance as if you were the younger version of yourself,” he explains.
Getting Permanent Life Insurance Coverage
Working with an insurance professional like Marcus is a great way to learn more about permanent life insurance and get coverage. Check out our helpful information on how to choose a qualified insurance professional. Then use our Agent Locator to find one in your area.
