Permanent Life Insurance Quotes, According to LIMRA (Life Insurance and Market Research Association) most individual life insurance contracts are permanent policies. Permanent or cash value life insurance policies are designed to build up a savings fund within the policy with a portion of the premiums that are above those required for administrated cost and the cost of insurance. Permanent insurance offers several distinctive features. The most noticeable distinctive feature is its access to cash values.
CASH VALUES:
All permanent policies have a guaranteed interest rate; yet, it can differ greatly between insurers. After a certain period of time, usually two years, the stronger insurers begin pay dividends into their permanent policies. Policy owners have a right to the cash values in the form of loans; or if in the case of dividends and interest, a loan is not applied. The policyowner does not have to pay back loans, loan interest, or dividends taken. However, taking either loans or dividends will not only effect the future values of the contract, but will cause the policy premiums to be due for a longer period of time. Policy loans rates are usually more favorable than other loan sources.
FLEXIBILITY:
Although term insurance is much cheaper for a long initial period (usually for at least 10 to 20 years depending on the age and rating of the insured, and choice of insurers and policies) permanent life insurance does offer the flexibility to stop paying premiums if the policy’s cash value can fund the premiums due.
GUARANTEED LIFETIME COVERAGE:
Whole life insurance policies and usually universal life plans funded at the target premiums will guarantee coverage to last over the insured’s entire lifetime. Not all variable life insurances policies guarantee against lapses. Underfunded universal life or variable life insurance policies that do not have a non-lapse guarantee are problematic. They are not only subject to market risk, but also because their premiums increase with the age of the insured, if the policyowner withdraws large portions of the cash values during their retirement years, it could cause the policy to lapse or call for additional premiums.
GUARANTEED LEVEL PREMIUMS:
Although there are modified permanent policies available, typically permanent life insurance has level premiums over the life of the insured. These premiums are guaranteed not to increase even if the insured’s health changes.
TAX ADVANTAGES:
The cash values in permanent life insurance accumulate on a tax-deferred basis. In most cases these values cannot be reached by creditors. Additionally, with few exceptions, the loans of these policies are not subject to taxes. The exceptions include if the policy becomes over-funded according to certain federal regulations (TAMRA 1988) and thus becomes a ‘Modified Endowment Contract (MEC);’ and also if the policy is surrendered and the surrender value exceeds the premiums put into the policy, it may be subject to receiving a 1099 on the gain potion.
