Is Permanent Life Insurance Worth It?

iQuanti: If you've researched life insurance before, you may know that permanent life insurance policies can cost more than term life policies. So, is permanent life insurance worth the extra cost? Read on to learn more about the benefits of permanent life insurance so you can decide whether it's worth investing in.

The benefits of permanent life insurance

Permanent life insurance comes with many benefits, including:

Lifelong coverage

Permanent life insurance provides you guaranteed coverage for the rest of your life, as long as you keep up with your premium payments. This can give you peace of mind knowing your loved ones have a safety net in the event of your passing.

Cash value

Many permanent policies come with a savings account called the cash value. Part of your premium goes into this cash value account, which grows tax-deferred over time at a fixed interest rate.

Once you have enough cash value, you can borrow against it at a low rate with no credit or income checks. You can pay it back at your leisure without the policy lapsing, as long as the outstanding principal and interest don't exceed the remaining cash value. You can also use your cash value to cover premium payments once you've built up enough.

If you surrender your policy before you die, you can receive your cash value balance from the insurance company. Just keep in mind that you may have to pay surrender charges. 

Dividends

Many life insurance policies pay dividends to policyholders. You can take these dividends as cash, use them to pay premiums, or reinvest them into your cash value.

Lower premiums for young policyholders

Many permanent policies have fixed, unchanging premiums. That means you can get a policy while you're young and healthy to lock in low premiums. As you age or run into potential health issues later in life, you won't have to worry about your premiums increasing. This means you won't have to pay as much in retirement while still offering ample coverage for your loved ones.

Variety of policies

There are several types of permanent life insurance you can choose from, including:

• Whole life insurance: This is the most common type of permanent policy. These types of plans have fixed premiums, a normal death benefit, and a cash value that grows at a fixed interest rate.
• Universal life insurance: These life insurance plans may let you adjust components like your death benefit. They might also allow you to use your cash value to reduce your monthly premiums.
• Variable life insurance: This type of life insurance offers additional investment options with a higher potential return, but they can also lead to losses since you aren't offered a guaranteed interest rate.

Should I get permanent life insurance?

When deciding whether permanent life insurance is right for you, you should consider your financial situation and coverage needs. If you want the peace of mind of lifelong, guaranteed coverage and like the idea of a savings portion within your policy, the higher premiums could be well worth it. It's often a great idea for policyholders with young families, since they can lock in a lower rate while providing coverage for their partner and children in case the worst happens.

As with any significant investment, review your circumstances and goals, and take time to shop around to find the best policy for you. After all, there are many types of permanent policies available. And when in doubt, consult with a financial advisor to ensure you find the right plan for you and your loved ones.