How Does Permanent Life Insurance Work?
1492 POINTSview profileJeff DavisInsurance Advisor, Lordship Insurance Services, CaliforniaThere are really only 2 types of life insurance; permanent insurance which means it can last the rest of the insured's life and will typically not call for an increase in premium. Then there is term insurance which only last for a set term and then disappears. Many permanent policies are the only policies you can purchase that offer cash value build up within the policy.Answered on October 19, 2013flag this answer
37376 POINTSview profileDavid G. Pipes, CLU®, RICP®Business Development Officer, T.D. McNeil Insurance Services, Fresno, CaliforniaThe permanent policy is designed to last a lifetime. Whole life policies not only last a lifetime but they are sustained by a level premium. Other permanent plans can have a flexible premium but they do not usually guarantee to last a lifetime. Actuaries compute what amount of money will need to be collected each year to pay deaths claims within the insured group in each year in the future. To maintain a level premium they will charge more in the early years than the cost of the “pure” insurance. This money, and the interest earned on the money combine to form the cash value of the whole life insurance policy. The cash value offsets the face amount of the policy reducing the need for “pure insurance.” At the time of death the beneficiary receives the face amount.Answered on May 22, 2014flag this answer
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