What is permanent life insurance?

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Permanent life insurance never expires, and it includes a "cash value" component that grows (or in some cases shrinks) over the life of the policy.

This cash value means you can do things like borrow against your policy or cancel the policy for part of the cash value after a period of time.

Pros:

  • It can be useful as part of a highly customized personal finance or estate planning strategy (e.g., if you have a lot of money and other assets to work with).

Cons:

  • It's far more expensive than term insurance.

  • Because of the cost, people frequently buy less coverage than they actually need.

  • It's more complicated to buy because there are lots of ways to customize the policy for your specific goals.

  • Depending on the type of permanent policy, you could see your death benefit shrink and/or premiums rise over time, or the cash value portion could decrease.

There are several types of permanent life insurance: whole, universal, variable, and variable universal.