Permanent life insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don't need to keep the policy for the long term, consider term life insurance.

Permanent policies are known by a variety of names: ordinary, whole, universal, adjustable and variable life.

Most permanent policies have a feature known as "cash value" or "cash surrender value." This feature, not found in most term insurance policies, provides you with some options.

Permanent Insurance Advantages

• As long as the premiums are paid, protection is guaranteed for life.

• Premium costs can be fixed or flexible to meet personal financial needs.

• A permanent policy accumulates a cash value against which you can borrow. (Loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.) You can borrow against the policy's cash value to pay premiums or use the cash value to provide paid-up insurance.

• A permanent policy's cash value can be surrendered -- in total or in part -- for cash or converted into an annuity. (An annuity is an insurance product that provides an income for a person's lifetime or a specified period.)

• A provision or "rider" can be added to a permanent life insurance policy that gives you the option to purchase additional permanent insurance without taking a medical exam or having to furnish evidence of insurability.

Permanent Insurance Disadvantages

• Required premium levels may make it hard to buy enough protection.

• Permanent life insurance may be more costly than term insurance if you don't keep it long enough.

Types of Permanent Insurance

Whole Life or ordinary life is the most common type of permanent insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.

Universal life or adjustable life allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums or maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy. (To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.)

Variable Life provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward -- stocks, bonds, combinations of both, or accounts that guarantee interest and principal. You will receive a prospectus in conjunction with the sale of this product.

The cash value of a variable life policy is not guaranteed and the policyholder bears the risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. If the specified investments perform poorly, cash values and benefits will drop.

Some policies guarantee that death benefits cannot fall below a minimum level. There are both universal life and whole life versions of variable life.

The answer on this page was edited based on source material from the Federal Consumer Information Center and the Ohio Department of Ins. These pages are no longer being updated. --Webmaster

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