A permanent life insurance remains in force for as long as the policy owner lives.  It generally has no age limit or a fixed term of coverage.  With this, a policy holder may live up to a hundred and his or her beneficiary/beneficiaries will still receive the insurance face amount upon the insured party’s death. 

This is the life insurance policy type with no timeline.  There is no need to prove insurability time and again, and the life insurance policy remains in force for as long as the policyholder keeps up the premium payments.

- Permanent Life Insurance Premiums -

Permanent insurance has an initially higher premium requirement than a term insurance policy that has the same face amount.  However, the insurance premiums usually remain the same throughout the life of the insured individual.  The premium payments generally do not increase even as the policyholder grows older and becomes a higher risk to the insurance company.

There are certain permanent insurance types, however, which have modified premium level schemes.  In such policies, the insurance premiums are generally lower.  These premiums will gradually increase until it reaches a certain plateau where the insurance premiums required will remain the same until the insured’s death.

There are permanent insurance policies that offer the insurance policy holder coverage up to a certain age.  In this case, the cash value attached to permanent insurance distinguishes this type from a similar term insurance policy.

- Cash Value for Permanent Life Insurance -

Permanent insurance policies have cash value equivalence separate from the face value of the purchased insurance scheme.  If the face amount is the benefit to be paid the beneficiary in the instance of the Policyholder’s death, the cash value is the amount of money that steadily builds up with the maturation of the insurance policy.

Since the insurance premiums in the early years of coverage are usually higher than the average cost of insuring the policy holder, the money in excess of the insurance company’s costs is set aside.  The extra funds accumulate and build up to become the policy’s cash value.  They may also be invested by the insurance company in high-yield investment instruments.  In any case, the policyholder may be paid calculated dividends based on his or her policy’s cash value.  There is no way to guarantee, though, that dividends will be paid.

The cash value is tax-deferred.  This means it is money that the policyholder saves up and accumulates without the need to pay taxes on it.  In times of financial emergencies, the policyholder may be able to take out a policy loan for which he or she will have to pay interest.  If the policyholder dies before full restitution is made for the policy loan, the loan amount plus accumulated interests will be deducted from the face amount of the life insurance policy.

The policyholder may also make withdrawals from the total amount of the purchased insurance scheme.  This will correspondingly reduce his policy’s total cash value.  Both withdrawals and policy loans made against the policy cash value are usually tax-free.

The cash value may also be used to pay insurance premiums later in life when the policyholder can no longer afford to do so.  If the policy owner no longer wishes to make insurance premium payments, the cash value can be used to purchase a paid-up insurance scheme that has a lower face amount.  Paid-up life insurance refers to insurance policies paid up front for the whole cost of insurance so no insurance premium payments have to be settled.

Moreover, the cash value may also be used to acquire an annuity contract from his permanent insurance provider.  This annuity will guarantee him or his beneficiary a fixed regular income subject to the terms and conditions stated in the contract.  Finally, a permanent insurance policy holder may surrender the insurance altogether and receive the equivalent cash value of his policy.  At this point, the cash value in excess of the premiums paid becomes taxable.  If the policy were surrendered, the face amount of the policy will not be paid out.

Permanent life insurance is ideal for people who want to have permanent and ongoing insurance, or those who want to be able to build up savings in the guise of the policy cash value for financial emergencies, their children’s educational plans, for retirement plans, and others.  Moreover, permanent insurance plans offer favorable tax treatments in as much as the money one saves up in cash value is tax-deferred.  If the policyholder decided to save money up through a savings account instead, his savings would have been automatically subject to taxes.