Overview on permanent life insurance

A permanent life insurance will cover the person insured for their entire life. Unlike term life insurance, a permanent life policy allows you to build up "cash value" in the policy. Basically, this type of policy combines a savings portion with a death benefit.

The savings component causes premiums to be significantly higher compared to term life policy and they must be paid on time. The investment may be in the form of mutual funds, bonds or money market securities or may offer a fixed interest rate.

You can choose from three types of permanent life insurance: whole life, universal life and variable life. Whole life and Universal life are the most commonly purchased life insurance policies.

Universal life insurance allows the insured to adjust the death benefit as their financial needs change as well as the flexibility to pay larger of smaller premiums.

With Variable life insurance you death benefit and cash value may either increase or shrink depending on your investment account.

Whole life insurance is the most expensive. The death benefit is a fixed amount and there is also less flexibility in premium payment.

Anyone looking to protect his beneficiaries while building up cash value, may want to consider purchasing a permanent life insurance.