Pros and Cons of Permanent Life Insurance Policies


A growing number of people are purchasing permanent life insurance products over term life insurance policies. This has been the trend for many years now and it is assumed that more people will be putting their hard-earned money on this particular type of life insurance. If you currently have a term life insurance policy under your name and is already nearing the end of its’ term, you may want to look at permanent life insurance policies first as a better life insurance policy than renewing your temporary life insurance.

What is a Permanent Life Insurance Policy?

A permanent life insurance policy is categorized into whole life and universal life insurance. These two policies offer the general features below. These benefits are basically unique to permanent life insurance policies and distinguish them from term life insurance products:

  • Accumulation of cash value

Although the cash value of a permanent life insurance policy is not equal to the face value of the insurance product that an insured has taken out, this added benefit presents itself as a source of funding among policy holders. During the life of an insurance policy, the policy holder is given the option to make use of the cash value.

Although this is the case, the cash value may diminish if a policy owner regularly borrows money from the policy that he or she purchased. The amount of extra cash that is generated from permanent life insurance may vary and depend on prevailing rates on the financial market. This means that the growth of cash value may differ from time to time.

  • Cannot be cancelled by a policy holder

Permanent life insurance policies are products that policy holders need to pay until maturity date. Most insurance companies set the maturity of whole life and universal life products when a policy holder reaches a specified age. Majority of insurance providers set the maturity of a policy when the insured reaches the age of 100. After this age, a policy holder can already stop paying premium amounts but still be paid out with both the cash value and death benefits stipulated in the policy.

  • Free access  of cash value of both whole life and universal life insurance policies

Typically, permanent life insurance products require owners to pay high premiums on a regular basis or in lump sum. Although it is known that these policies are four to six times more expensive than premiums paid by term life insurance policy holders, they are given the chance to access cash accumulations earned by their policies.

Policy holders can take out money against their whole life or universal life insurance, borrow the current cash value and return it within a specified period, or surrender the policy and obtain the surrender value of their insurance.