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Permanent Life – Permanent life insurance policies can have a cash value that has the potential to increase over time. It’s a financial resource you can use during your lifetime by borrowing from the policy and using its cash value as collateral. Some permanent life policies allow a wash loan after a certain number of years. Three types of permanent life polices.
The premiums for whole life insurance stay the same over the life of the policy. Other features add to its appeal for conservative clients:
- A guaranteed death benefit
- Tax advantages
- Guaranteed cash value with conservative accumulation
- Long-term protection
- Loan provisions
- The potential for dividends with some policies
Universal life: flexibility to cope with changes
Universal life (UL) insurance provides a guaranteed death benefit (if certain premium levels are met), tax advantages and the ability to take loans and partial withdrawals. It also has more flexibility than whole life, with features that let it adapt to changes in the financial marketplace and your personal circumstances:
- Interest-sensitive growth
- Growth potential based on the insurance company’s portfolio of investments
- Flexible premium payments and death benefits as long as specified policy minimums are met
- Guaranteed death benefit for some policies
Variable universal life: market-based investment potential
Most variable universal life (VUL) insurance policies offer the same flexible premium features, tax advantages and the opportunity for access to cash values as universal life. Most VULs do not have a guaranteed death benefit, but some offer riders that guarantee the death benefit for an additional cost.
Variable universal life is unique in combining permanent life insurance protection with the ability to invest in underlying investments. VUL offers opportunities for investors who are comfortable with market risk:
- The potential for market-driven growth
- Deferred income tax on earnings
- The option of maximum funding for even greater potential growth
As you consider this option, remember that the underlying investment choices offered by VUL policies are subject to market risk, including possible loss of principal.
The underlying investment options are not publicly traded and cannot be purchased directly by the general public. The cost of a VUL policy includes expenses associated with these underlying funds.
Term life insurance provides coverage for a specific time period, normally 10, 15, 20 or 30 years. It pays a death benefit if the insured person dies within that term. This means you can choose a term life policy to cover you only when you need extra financial protection — until the mortgage is paid off, for example, or until your youngest child is age 21.