The Different Types of Permanent Life Insurance Policies
You’ve done the proper research, and decided that you want to purchase a permanent policy.
But after doing a quick Google search, you’ve realized there are multiple types - which one do you choose?
This article discusses the different types of permanent life insurance policies, as well as which demographic fits each one best.
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When people think of permanent life insurance, whole life is usually the first thing to come to mind. This a very common type of permanent life insurance - although it’s not our first choice (more on that later).
These types of policies have fixed premiums (most of the time), a death benefit, and a cash value component. What is cash value, you ask? When you pay your premiums, a small amount of that money is put into your cash value, which *ideally* accumulates over time. Unfortunately, this accumulation is often very minimal, if any at all.
A perk of whole life insurance is the fact that they ask a minimal amount of health questions, and do not require a medical exam to be completed for approval. To determine your insurability, the life insurance company you apply with will electronically review your medical records and prescription history. Because of the shorter underwriting period, these policies are often issued much faster than others, often within a week (if everything checks out, of course).
However, it’s important to note that these policies do not offer coverage over $50,000, so if you’re looking for a large policy, this isn’t it. Also, these policies are typically only in effect until age 80, so if you live past that, it’s not really permanent coverage.
One final thing about whole life insurance - it’s extremely expensive. Since it is accessible without asking too many health questions or requiring an exam, it makes sense that this type of policy will be more pricey.
Summary: If you’re looking for a small amount of coverage that you need fast without taking a medical exam, and don’t mind paying a little more for, whole life insurance may be a good option.
Like whole life, this type of life insurance also has a cash value component. The difference is, however, that universal life insurance provides more flexibility when it comes to premiums and the death benefit.
Universal life (UL) has what’s known as a cost of insurance (COI) amount - this is the minimum amount of a premium payment required to keep your policy active. Basically, you can skip a payment here or there if you need to, as long as you pay the required amount by the end of the year.
This is a nice option in case life hits you with an unexpected financial payment, and you need to put your usually premium money towards that for the time being instead.
Summary: Similar to whole life, but includes the flexibility of how much you pay on your premiums and when you can pay them.
Variable life is another type of permanent life insurance with a cash value component, but in addition, policyholders are offered the opportunity to put said cash value into an investment account, which is managed by the life insurance company.
If your investment does well and you profit from the investment, those earnings can be used towards your premiums or added to your death benefit (depending on what you choose). However, if your investment doesn’t go so well, your death benefit may decline. Most companies do have a guaranteed minimum death benefit, though.
Summary: A variation of whole and universal life with an added investment component.
You can probably guess where this is going: variable life + universal life = variable universal life insurance.
Basically, it’s everything about variable life insurance, meaning you have flexibility on premium payments with the addition of an investment component. Unfortunately, because there’s so many parts to this type of life insurance, it can be very difficult to understand.
Summary: Variable life and universal life mashed together, not an easy policy to understand.
Probably our favorite out of the permanent policies, guaranteed universal life insurance (also known as GUL). We like to explain this policy as somewhat of a hybrid between whole life and term life insurance.
It’s permanent, like whole life insurance, and instead of being in force for a fixed number of years (like term life), GUL is in effect until a certain age, such as 90, 95, 100, 105, 110, or even 121.
Most of these policies require a medical exam, so they’re best for someone who is in average to excellent health. Guls are typically best for funding a trust, leaving an inheritance behind to your loved ones, or protecting your heirs from estate taxes (read all about estate taxes here).
GUL policies are usually a little more expensive than term life, but cheaper than whole life. It really is the perfect mix of both policies.
Summary: A hybrid of whole life and term life with fixed premiums, easy to understand, and our favorite of the permanent policies.
We understand that everyone’s situation is unique, and life insurance is not a one-size-fits-all business. If you need help purchasing a policy, give us a call!
At JRC Insurance Group, we have helped thousands of families and businesses with their life insurance needs, and we can help you too! Our agency is licensed in all 50 states and we’re independently owned and operated.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from 63 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Most importantly, our services as completely free, and there is no cost to apply for coverage. Give us a call toll-free today at 855-247-9555, or you can request a free quote online to compare rates and options from dozens of insurance companies in less than a minute.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.