Permanent Life Insurance
In contrast to term insurance, permanent insurance does not have an expiration date. The policy will pay out upon death at any age. Permanent insurance is considered analogous to buying and acquiring an asset because an eventual payout is guaranteed when the insured passes away. Term insurance on the other hand is often considered renting because the vast majority of the time a payout and return of premium never occurs. For this reason, term insurance is much cheaper than permanent insurance. As the cost of permanent insurance can be prohibitive, many of our clients opt to acquire a combination of term insurance to meet their short and mid-term needs and permanent insurance to meet their long term needs.
Permanent insurance can serve several purposes. The simplest purpose is final expenses: dying is expensive and a small permanent policy can provide money for funeral and estate costs. Other times, permanent insurance is used to fund capital gains liabilities on death such as taxes on a recreational property or a family owned business. Permanent insurance can also be used to shelter investments from taxation.
There are effectively 3 kinds of permanent insurance: term 100, universal life, and whole life.