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A
permanent life policy provides lifelong insurance protection. The policy
pays a death benefit if you die tomorrow or if you live to be a hundred.
There is also a savings element that will grow on a tax-deferred basis
and may become substantial over time. Because of the savings element,
premiums are generally higher for permanent than for term insurance.
However, the premium in a permanent policy remains the same, while term
can go up substantially every time you renew it.
There are a number of different types of permanent insurance policies,
such as whole (ordinary) life, universal life, variable life, and
variable/universal life. In a permanent policy, the cash value is
different from its face value amount. The face amount is the money that
will be paid at death. Cash value is the amount of money available to
you. There are a number of ways that you can use this cash savings. For
instance, you can take a loan against it or you can surrender the policy
before you die to collect the accumulated savings. |
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unique features to a permanent policy such as: |
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You can
lock in premiums when you purchase the policy. By purchasing a permanent
policy, the premium will not increase as you age or if your health
status changes. |
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The
policy will accumulate cash savings.
Depending on the policy, you may be able to withdraw
some of the money. You also may have these options: |
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Use
the cash value to pay premiums. If unexpected
expenses occur, you can stop or reduce your
premiums. The cash value in the policy can be
used toward the premium payment to continue your
current insurance protection – providing there
is enough money accumulated. |
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Borrow from the insurance company using the cash
value in your life insurance as collateral. Like
all loans, you will ultimately need to repay the
insurer with interest. Otherwise, the policy may
lapse or your beneficiaries will receive a
reduced death benefit. However, unlike loans
from most financial institutions, the loan is
not dependent on credit checks or other
restrictions. |
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