PERMANENT LIFE INSURANCE
Select a type of insurance below to learn more:
• Whole Life
• Universal Life
• Equity Indexed Universal Life
• Variable Universal LIfe
There are several different types of permanent life insurance. Permanent life insurance has two main aspects - the death benefit and a cash value account which builds value. As premiums are paid, money goes into the cash account and grows with interest on a tax-deferred basis. It is because of the cash value buildup that permanent life insurance is considered an asset. It has worth and holds value - think of equity when you purchase a home. If you no longer want the coverage, you may surrender your policy and receive the cash value. If you wish to access the cash value and not surrender the policy, you may take withdrawals/loans from the policy that remain completely income tax free. This makes life insurance a great asset for tax-free retirement income and lifelong insurance protection.
For each premium payment, a portion goes towards paying for expenses and the cost of insuring your life. The rest gets placed into your cash account. This cash value grows income tax free. You may also borrow money from your life insurance policy in the form of a policy loan. The money received from these loans may also remain income tax free with no obligation to pay back the loan (any outstanding loans and interest due is paid back through the death benefit upon death).
Here are a few common uses of the cash value from a permanent life insurance policy:
• Retirement - Many people choose to fund their retirement through the use of permanent cash value life insurance. With favorable tax rules, retirement income can grow on a tax-deferred basis and may be borrowed income tax free. Once retirement is reached (or even before), tax-free withdrawals and loans can be taken from the policy. These loans do not need to be paid back until death. As withdrawals and loans are taken from a policy, the death benefit is reduced accordingly, eliminating the need to pay back the withdrawal/loan. This can be viewed as an automatic repayment of your loans. See retirement planning for more information.
• Funding college - By way of the cash value growth within permanent life insurance, college may be funded on a tax-free basis. Similar to using permanent life insurance for retirement purposes, many choose to fund a life insurance policy for college due to it's extremely favorable tax laws.
• Emergencies - You and your family may cope during difficult times by having access to the cash value within your permanent life insurance policy.
• Extra cash - Whoever complained about having extra money? The cash value buildup can be used for virtually anything. Whether it be a down payment on a new home, a trip to Italy, or that speedboat you have always wanted, having tax-free income will never be a bad thing.
