Permanent life insurance: What you need to know

What is permanent life insurance?

A permanent life insurance policy covers you throughout your life as long as you pay the premiums. The most common types of permanent life insurance are whole life and universal life. Permanent life insurance includes a death benefit and a cash accumulation account, which can be accessed during your lifetime. You choose the death benefit, but the amount in the cash account will vary.

What does permanent life insurance cover?

Permanent life insurance provides a death benefit that your beneficiary can use for almost any purpose. Unlike health or auto insurance, it does not reimburse one specific type of expense. Instead, the insurer pays the death benefit to the beneficiary, who can decide how to use the proceeds.

Permanent life insurance covers anything your chosen beneficiary wants; it can be used for:

Funeral and burial expenses
Final expenses
College tuition
Mortgage payoff
Medical bills
Travel
Charitable contributions

There is really no limit on what the beneficiary can use the death benefit to pay for. Once it is paid out, it is entirely at the beneficiary's discretion. That's why it's important to choose your life insurance beneficiary carefully.

Permanent life insurance will last for your entire life, as long as you pay the premiums. It doesn't expire like term life insurance, but you do have to keep paying for it.

How much does permanent life insurance cost?

Permanent life insurance costs $80 to $410 a month for a $100,000 whole life policy, based on current Ethos estimates for nonsmokers in average health. A 30-year-old female pays about $80 a month, while a 60-year-old male pays about $410, showing how sharply premiums rise with age.

Cost depends on several factors, including:

Your age and gender
Health and medical history
The type of policy
The coverage amount

Here’s a sample premium comparison chart from Ethos for a whole life insurance policy.

These premiums are for $100,000 in whole life coverage at standard, non-nicotine rates.

Age	Female	Male
30	$80/month	$89/month
40	$121/month	$133/month
50	$205/month	$229/month
60	$348/month	$410/month

As you can see, whole life insurance premiums are higher if you buy a policy when you’re older. That’s because an insurance company bases premiums on life expectancy. Keep in mind:

Regardless of the type of life insurance policy you choose, you will pay more the older you are when you apply.
A 20-year-old will likely pay premiums for many more years than a 50-year-old before the insurance company has to pay a claim.
In addition, men usually pay more for life insurance because men have a shorter life expectancy than women.
The higher the death benefit amount, the more you can expect the premiums to be, regardless of other factors. Because a permanent life policy lasts your entire life, the insurance company expects to pay the death benefit at some point, which means higher premiums.

How much permanent life insurance do I need?

You need enough life insurance to cover any expenses you will leave behind when you die and any financial support you would like to provide to family or other loved ones. Start by considering income replacement, debts, final expenses, and future financial needs. Then subtract savings, investments, and existing life insurance. Some experts recommend having ten times your annual salary in life insurance coverage.

However, the exact amount depends on factors like:

Your age when you purchase the policy: Later in life, you may need a smaller coverage amount, but if you are young, you might need more to provide for children, a mortgage, and more.
When you expect to need the coverage: Is it just for final expenses in the near future? Or are you planning well in advance and would want to provide a bigger death benefit in case you die prematurely?
Whether you have additional life insurance: If you already have a term life policy in place with a larger death benefit, you may only need a small permanent policy to provide some coverage after the term life expires.

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25yrs

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$50,000

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Based on the information you provided, you need a combination of term and life insurance policies.

Term life insurance
(20 years policy)

Whole life insurance

Disclaimer: Your coverage needs may be lower depending on your savings, assets and retirement funds. Your coverage need may be higher if you want to provide funds for your beneficiaries to pay estate taxes. The amount of life insurance coverage you need could be less or more depending on how the surviving spouse chooses to invest the death benefit, and whether the surviving spouse chooses to work. The information in this tool should not be interpreted as legal or financial advice, or as a recommendation to buy or forgo any insurance product.

How does permanent life insurance work?

Permanent life insurance is simple: you pay the premium and when you die, the insurance company pays the death benefit. Permanent life insurance lasts through your entire life as long as the premiums are paid, unlike term life.

Also unlike term life, permanent plans include a cash value component. A portion of what you pay goes into a cash accumulation account, where it gains interest.

Cash value is not simply a separate savings account into which the insurer deposits part of every premium.

Your premiums pay the cost of insurance, policy expenses and other charges. The remaining amount is credited or allocated according to the policy's terms.

Depending on the policy, you may be able to access cash value through:

Policy loans
Withdrawals
Surrendering the policy
Certain nonforfeiture options

Policy loans accrue interest, and an unpaid loan with interest may reduce the death benefit your beneficiaries receive.

Benefits of permanent life insurance

Permanent life insurance provides lifelong protection and accumulates cash value, making it a good fit when you need lifetime coverage rather than for a set period. Whole life offers predictable premiums and guaranteed values, while universal and variable policies provide greater flexibility or investment options but can involve more complexity and risk.

Permanent life insurance offers several benefits:

You're covered for life: Lifelong coverage that doesn't expire
Cash value: A cash accumulation account that you can borrow against
Locked-in premiums: Rates don't change as you age or if your health changes
Potential investment opportunity: Some permanent life insurance plans offer an opportunity to invest and grow your money.
Flexibility: Universal life insurance policies offer flexibility in the premiums and death benefits.

Term vs. permanent life insurance

Term life insurance is designed to provide coverage for a specific period, while permanent life insurance is designed to remain in force throughout your lifetime and build cash value. Term life insurance is often appropriate for temporary financial needs. Permanent coverage is appropriate when you have a lifelong need and can afford the higher premiums.

However, these policies differ in three main ways:

Term life insurance provides temporary coverage, usually for 10 to 30 years. If you die during the term, your beneficiary receives the payout. If you outlive the term, your coverage typically expires (unless the policy is converted). On the other hand, permanent life insurance covers you for your lifetime and pays out whenever you die.
Another difference between term vs. permanent life insurance is that permanent policies generate cash value. With each premium payment, a portion of the money goes toward cash value, like a savings account. You can borrow or withdraw the money like a loan, and the funds can be used for any purpose.
In addition, term life insurance is cheaper than permanent life insurance from the outset, but term premiums may increase with age. However, when choosing between term and permanent life insurance, it’s important to consider your family's needs, not just the cost.

"Most people think first and foremost about price and affordability when deciding between term life and permanent life policies, but there are more important considerations like understandability, suitability and sustainability. Do you understand the products you are considering? Are they the right fit for you? And will you be able to continue to pay for them or fund them?" said Spencer Barclay, founder and CEO at Saveology.

In the table below, you can see how the two types of life insurance compare:

	Term life	Permanent life
Length of time	Limited: Commonly 5 to 30 years	Lasts your whole life
Premiums	Often less expensive than permanent life	Usually more expensive
Cash value	No cash value	Accumulates cash value that you can access while you're alive if needed
Conversion option	Term life policies can often be converted to a permanent life policy when the term ends	You can't convert from permanent life to term life

Types of permanent life insurance

Permanent life insurance varies by premium structure, cash-value growth ,and risk. Whole life generally offers predictable premiums and guaranteed cash values. Universal life provides flexibility, but it must remain adequately funded. Variable policies link cash value to investment performance, creating greater risk.

The main differences are the cost and how the policy’s cash value grows. Here are the most common forms of permanent coverage:

Whole life insurance provides a guaranteed benefit, a guaranteed earnings rate on your cash value, and a consistent premium. Some whole life policies can also earn dividends based on the company’s financial performance. Whole life is the most basic permanent life insurance and has little risk.
Universal life insurance is a flexible plan that lets you adjust the premiums using cash value. Many policies also allow you to change the death benefit. However, one risk with universal life is that your policy could lapse if you don't have enough cash value or if interest rates drop. Newer types of universal life insurance often have guarantees to ensure that this doesn't happen.
Variable life insurance ties your policy to an investment. The performance of the investment directly impacts your death benefit. Variable life is one of the riskiest forms of permanent life insurance.
Variable universal life insurance is a hybrid of variable life and universal life insurance. It allows you to adjust your premiums and death benefit and invest your policy premiums. Variable universal life insurance provides flexibility, but it can also be risky, depending on the investments you choose.
Final expense insurance provides a small amount of coverage for people who want to help their loved ones pay for their end-of-life expenses. Most final expense insurance policies are available without a medical exam and provide up to $50,000 in coverage. The premiums are fixed, and the death benefit is guaranteed. In most cases, these policies also build cash value.

People ask

What type of insurance offers permanent life coverage with premiums that are payable for life?

Whole life, universal life and other forms of permanent life insurance provide coverage for your entire life as long as you continue to pay the premiums. For most of these policies, you will need to continue paying for your entire lifetime, although some can be purchased with a lump sum.

What is life insurance cash value?

Cash value is the savings account portion of a permanent life insurance policy. With each premium payment, some of the money is deposited into an account that grows at a predetermined interest rate. You can borrow or withdraw the money while still living, but there are conditions.

For instance, imagine that you need major surgery and need to pay a medical bill. You could withdraw some of your cash value to pay it off.

There are two important things to know about cash value accounts:

When you borrow the money, the insurance company essentially gives you a loan. You must pay the money back with interest.
Your beneficiary usually does not get to keep the money after you pass away. If you don’t use the cash value from your policy while living, the money goes back to the insurance company.

How to convert from a term life policy to a permanent life plan

You can convert some term life policies to permanent life insurance without going through new medical underwriting. The key is to convert before your policy's deadline, which may come before the term ends or before you reach a certain age. Check your policy early so you don't lose the conversion option.

Converting a term life policy can be a good way to keep your coverage in force and lock in coverage for the rest of your life. However, remember that permanent life insurance premiums are based on age. So, you’ll pay higher premiums if you convert the policy when you’re 65 than if you convert the policy at 45.

How to buy permanent life insurance

To buy permanent life insurance, start by deciding how much coverage you need. Then compare several policies based on premiums, guarantees, cash value, fees, and policy risks. Permanent insurance can be complex, so understanding how the policy works is just as important as comparing its price.

Unlike term life insurance, many permanent life insurance policies can’t be purchased online. Depending on the insurance company, you may need to contact an agent to get a quote and apply for a policy.

Start with these steps:

Calculate how much coverage you need. Consider income replacement, debts, dependents and other long-term financial needs.
Decide which type of permanent coverage fits your goal. Compare whole life, universal life and other permanent options.
Get quotes from several insurers. Request quotes from three to five insurers.
Review guaranteed and non-guaranteed values. Policy illustrations may include projections that are not guaranteed.
Check the insurer's financial strength and complaint history.
Complete underwriting. Depending on the policy and insurer, you may need a medical exam, answer health questions or qualify through another underwriting process.
Review the final policy carefully. Check the premiums, death benefit, cash value, loans, riders and surrender terms.
Confirm when coverage takes effect. Make the required premium payment and keep your policy records.

Some policies require a medical exam. This usually involves a general physical and blood draw.

There are usually a few weeks to a month waiting while the underwriter reviews your application and your exam results. Your coverage takes effect once you’re approved and you pay the first premium.

Final thoughts: Permanent life insurance

Many permanent life insurance policies, such as whole and universal life insurance, offer lifelong coverage with benefits that can be accessed while you’re alive. It's ideal for those who want a guaranteed death benefit and the added advantage of cash value accumulation.

However, it's generally more expensive than term life insurance and not everyone needs the lifelong coverage. Additionally, the cash value may not benefit those who haven't maxed out other investments. Speak to an agent or financial advisor before getting a permanent life insurance policy to ensure you get a life insurance policy that meets your needs.

FAQ: Permanent life insurance

Is permanent life insurance worth it?

Permanent life insurance may be worth it if you need lifelong coverage and can comfortably afford the premiums. It makes sense if you have a lifelong dependent, estate-planning needs, or to leave a financial legacy. If your insurance need lasts only for a set period, term life may provide more coverage for less money.

How much coverage can you get with permanent life insurance?

The amount of coverage you can buy depends on the company and factors about you; young, healthy people can generally qualify for a higher death benefit. Death benefits can climb into the millions.

What happens if you cancel your life insurance?

If you cancel your permanent life insurance policy, you will no longer have coverage, but you will not get back any premiums. However, you will get any cash value amount.