What are the types of permanent life insurance and which one for you?
The thought of death is uncomfortable — preparing for it may be even more uncomfortable. But purchasing permanent life insurance may help ensure that you leave your loved ones in a good position after you pass. This informational guide on types of permanent life insurance should assist you in weighing all your options as you start preplanning.
What is permanent life insurance?
Permanent life insurance, or “whole life insurance,” is any insurance plan that stays in force for the duration of your life as well as provides a death benefit to loved ones after your death. Many permanent life insurance plans accumulate cash value over time and allow policyholders to borrow from the accumulated cash — although failure to pay back the loans usually results in a deduction from the death benefit. Permanent life insurance lasts for the whole life in contrast to term life insurance, or pure life insurance, that only pays death benefits to beneficiaries if a death occurs during a specified period of time. This period typically ranges between 1 to 30 years, depending on the policy. Because term life insurance is temporary, you have the option to renew it, terminate it, or convert it to a permanent coverage policy if you are still living when the period expires.
What types of permanent life insurance are available?
As a general rule, only three types of permanent life insurance exist: traditional whole life, universal life, and variable universal life.
Traditional whole life
For this type of permanent life insurance, both your death benefit and the premium you pay will remain the same throughout the duration of the policy. According to the Insurance Information Institute, insurance companies keep the premium level by charging a higher amount than needed to pay claims in the early years of the policy. Insurance companies invest the money and use it to supplement the premium to help pay the cost of life insurance for older people. “By law, when these ‘overpayments’ reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan,” according to the Insurance Information Institute. “The cash value is an alternative, not an additional, benefit under the policy. During the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product — universal life insurance and variable universal life insurance.”
Universal life insurance
A portion of the premium you pay on universal life insurance is placed in an account attached to your policy as cash savings, while the remainder is put toward the death benefit. This cash savings account accumulates interest over time, tax-deferred. The cash component provides a way to temporarily stop paying premiums in an emergency provided the cash value can cover the cost of the insurance. You may take tax-free loans against the cash value and you can adjust the death benefit over time.
Variable universal life insurance
Similar to universal life insurance, variable universal life insurance includes a cash savings component, and you have the option to invest some of it. This option provides you more control and potentially higher returns. The final earnings may be allocated either toward your premiums or death benefits. Making wise investment decisions, may allow you to take advantage of significant tax-deferred earnings, Remember, the opposite is also true meaning that if you pick riskier methods and the market performs poorly, the significant drop in account value could require you to pay additional premiums just to keep your policy active.
Great Western Insurance Company permanent life insurance through CAA Group LLC
Preneed Funeral insurance
Preneed Funeral insurance, or burial insurance, discussed in earlier segments remains a type of permanent life insurance that only covers your funeral expenses. It’s purchased through a funeral home, which becomes your insurance beneficiary. You attend a preplanning appointment with your funeral home director, where you choose every service and benefit you desire included in your funeral service. The funeral home director totals the costs, and that amount is the foundation of your Preneed Funeral insurance plan with Great Western Insurance Company (GWIC) through CAA Group LLC. It also holds that rate for the cost of your funeral, independent of inflation. Upon your death, the funds are given to the funeral home to pay for your funeral, and your family is not required to pay anything extra. Preneed insurance “provide the family and survivors the guidance that they require in holding their loved ones’ funeral,” said Chad Iverson, executive sales manager at Great Western Insurance Company. GWIC’s Preneed insurance plans were “designed by funeral home directors, who were very knowledgeable about what families needed upon the death of a loved one,” Iverson said. GWIC offers two Preneed insurance plans: Voyage and Course. Both products offer a favorable growth rate, a variety of payment structures (Single Pay, One-year, Three-year, Five-year, and Ten-year payment plans), and a free 30-day trial. The premiums will never increase, and no prospective policyholders will be turned down because of their health status. To learn more, visit the Preneed Funeral insurance page.
Final Expense insurance
Final Expense insurance not only covers the costs of your funeral service, it covers any expenses your loved ones may face following your passing as well. Expenses such as outstanding medical or credit card bills, estate taxes, legal fees, and living expenses are allowed. Remember, FE will not hold preplanned funeral costs at present-day amounts, and you must completely list your wishes for how you want to be remembered. GWIC offers two Final Expense Whole Life insurance products: Guaranteed Assurance and Assurance Plus. Guaranteed Assurance requires no underwriting or answering of health questions to purchase. Assurance Plus is designed for those in good health and gives the policyholder a 25% increase of the full death benefit upon answering three medical questions. Specific details can be found by contacting CAA Group LLC for Final Expense insurance information.