Permanent Insurance

With permanent insurance there's an investment component to build cash value in addition to the death benefit. A policy's face amount is the money that will be paid at death or at policy maturity -- most permanent polices mature around age 100. Cash value is the amount available if you die or surrender a policy before its maturity, according to the Life and Health Insurance Foundation for Education, or LIFE.

The cash value grows tax-deferred until you withdraw it. You can borrow against the cash value for any purpose, but you'll have to repay it or your beneficiaries will receive reduced benefits. But building cash value means higher premiums, so these polices are much more expensive than term insurance.

Whole life, according to LIFE, provides you with a guaranteed death benefit and a guaranteed rate of return on your cash values. You pay a set premium that is guaranteed to never increase.

With universal life, the insurer separates the death benefit from the investment portion of the premiums, putting your investment dollars into its choice of bonds, mortgages and money markets. Then your investment fund pays for the cost of the set death benefit. No matter how poorly your investments do, you are guaranteed a minimum death benefit. If the investments do well, your heirs receive more money.

The death benefit and the cash value in a variable policy vary with the performance of the underlying investments, says LIFE. With variable life you're shifting risk from the insurance company to yourself because you're trying to achieve greater returns.

Permanent life policies can be complex. Don't buy such a policy if you don't understand it. If the seller explains it to your satisfaction and it meets your needs, then by all means get permanent life insurance.

Many experts say that, generally, these policies should not be used as savings vehicles for a child's college education or for retirement. Better options would be a 529 plan, prepaid tuition plan, the federal Coverdell plan, a 401(k) or an IRA where you're not paying an insurance premium.

A permanent life insurance policy might be good if you have a disabled dependent who will need long-term care. In that case, you might want to insure yourself for your entire life, as opposed to a typical situation where parents stop insurance coverage when their children finish college.

For additional help or FREE Life Insurance Quotes~Please call Atkins & Associates at: 540-286-2323 or visit us at: www.atkinsandassociates.net

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