Permanent vs. Whole Life Insurance: What’s Right for You?

iQuanti: Purchasing life insurance is a great way to help protect and care for your loved ones when you pass away. While it can be an emotional decision and difficult to think about, life insurance policies can help your beneficiaries pay for funeral expenses, medical bills, outstanding debts, and other financial obligations they may have once you’re gone.
If you’re considering getting a policy, you’ll find that there are a number of different types of life insurance, each with pros, cons, and different components and benefits. Read to learn about one type of policy, permanent life insurance, and how to know if it is right for you.  
What is permanent life insurance? 
Permanent life insurance is a type of policy that doesn’t expire, and typically combines a death benefit with cash value accumulation. The death benefit is what is paid to your beneficiaries when you pass away, and the cash value accumulates throughout the life of the policy (as long as you keep paying your premium).  
Unlike term life insurance, which is in force for specified period of time, permanent life insurance lasts from the time you purchase the policy until you pass away as long as you pay the required premiums to keep the policy in place. 
There are primarily two types of permanent life insurance: 
What is whole life insurance? 
The most common type of permanent life insurance is whole life insurance. Typically, the premiums and the death benefit stay fixed for the duration of the policy, meaning they don’t change — although in some cases the death benefit may grow over time if the policy receives dividends. With a whole life insurance policy, your death benefit is guaranteed as long as you continue to pay premiums.  
What is universal life insurance? 
Universal life insurance is similar to whole life insurance in that it offers permanent coverage. However, universal life insurance typically offers more flexibility and variability throughout the life of the policy. 
With a universal life insurance policy, the cost to insure you is calculated and charged to your policy. If you pay more than what you are required to, the additional payment accumulates as cash value, which earns interest every month. As the cash value in a universal policy accumulates, you can use it to cover the insurance costs without reducing your death benefit. However, any time there is insufficient cash value to cover those costs, the policy can lapse, which would potentially result in negative tax consequences. 
How do I choose the best life insurance? 
A whole life insurance policy may be a great fit for someone who is looking for fixed premiums, minimum guaranteed savings, and a guaranteed death benefit. 
UL works best when you have more sophisticated financial needs as it can add flexibility for your overall financial plan 
To choose the best life insurance, think about the goals you have both in life and after you’re gone. The death benefit can help you plan for your legacy while the cash value can give you financial flexibility during your lifetime*.   
*Disclosure Utilizing the cash value through policy loans, surrenders, or cash withdrawals will reduce the death benefit; and may necessitate greater outlay than anticipated and/or result in an unexpected taxable event. Assumes a non-Modified Endowment Contract (MEC). 
Source: iQuanti, Inc.