Permanent Life Insurance: Definition, Pros and Cons

Permanent life insurance typically lasts your entire life and builds cash value, but it’s more expensive than term life.
Georgia Rose
By Georgia Rose 
Updated
Edited by Katia Iervasi Reviewed by Tony Steuer

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When shopping for life insurance, you have a choice between two main types: term and permanent. Although term policies are sufficient for most people, permanent life insurance usually offers lifelong coverage and the opportunity to build cash value you can borrow against — making it suitable for some applicants.

What is permanent life insurance?

Permanent life insurance generally covers you for the rest of your life and pays out regardless of when you die — as long as your policy remains in force. These types of policies also include a cash value component that you can withdraw from or borrow against while you’re still alive. Depending on the policy, you may be able to adjust your premium payments and coverage amount to fit your needs.

Types of permanent life insurance

If you're shopping for life insurance and decide to buy a permanent life policy, there are many types to choose from. Your decision will depend on how much risk you’re comfortable with and how much flexibility you want.

Whole life insurance

Whole life insurance policies have fixed premiums and a cash value component that (slowly) accumulates.

Insurers may offer different payment schedules, such as paying premiums up to age 100, paying premiums for a fixed number of years (such as 10, 15 or 20 years while maintaining coverage after payments stop) and single-payment policies. When you die, your beneficiaries typically receive the face amount of the policy, not the face amount plus cash value. You can withdraw money or borrow against the cash value during your lifetime — just know that if you don't pay it back, the insurer will reduce the life insurance death benefit by the same dollar amount.

Universal life insurance

The main draw of universal life insurance is that it allows you to adjust your premiums and death benefit, giving you flexibility as your financial circumstances change. You can also combine the cash value with the death benefit to increase the payout to your beneficiaries, though the premiums will be more expensive if you choose this option.

Indexed universal life insurance is a specific type of universal life insurance that’s tied to a stock or bond index, like the S&P 500. It offers similar flexibility in premiums and death benefits as universal life.

Variable life insurance

Variable life insurance offers policyholders the opportunity to put their cash value in investments of their choosing, which can make this type of coverage riskier than whole or universal life. You may have the option — similar to universal life — to include the cash value in the death benefit. Premiums are typically fixed, and returns on the cash value are not guaranteed.

Variable universal life insurance

What do you get when you mash together variable life and universal life? You get variable universal life, or VUL, a type of life insurance with a lot of moving parts. The policy’s underlying cash value is subject to the ups and downs of the investments you choose. You can adjust your premium payments and death benefit. However, this increased flexibility comes with risks. If your investment choices don’t pan out the way you’d hoped, you could end up owing money or even losing the coverage.

Other permanent policies

There are more specific types of permanent life such as survivorship policies, which are a form of family life insurance. These policies insure two lives at once — typically spouses — and pay out when the second person dies.

If you’re looking at permanent life insurance for retirement or investment goals, discuss it along with other options with a fee-based life insurance advisor before making a decision.

Permanent life insurance cost

The cost of permanent life insurance can vary significantly among policy types. These average rates reflect a $500,000 whole life policy for applicants in good health.

Average annual whole life insurance rates for nonsmokers

Age

Average annual rates for men

Average annual rates for women

20

$3,005

$2,633

30

$4,188

$3,722

40

$6,383

$5,560

50

$10,313

$8,775

60

$16,548

$14,227

70

$28,702

$24,817

Source: Covr Technologies. Lowest three rates for each age averaged. Data valid as of May 31, 2024.

Average annual whole life insurance rates for smokers

Age

Average annual rates for men

Average annual rates for women

20

$3,678

$3,075

30

$5,472

$4,715

40

$8,608

$7,307

50

$13,783

$11,717

60

$23,277

$19,525

70

$38,308

$33,437

Source: Covr Technologies. Lowest three rates for each age averaged. Data valid as of May 31, 2024.

Term life insurance cost

Term life insurance is often more affordable than permanent life insurance because it's temporary and doesn't build cash value. These are the average annual rates for a $500,000, 20-year term life policy for smokers and non-smokers.

Average annual term life insurance rates for nonsmokers

Age

Average annual rates for men

Average annual rates for women

20

$216

$177

30

$221

$187

40

$334

$282

50

$819

$642

60

$2,357

$1,656

70

$9,436

$7,994

Source: Covr Technologies. Lowest three rates for each age averaged. Data valid as of May 31, 2024.

Average annual term life insurance rates for smokers

Age

Average annual rates for men

Average annual rates for women

20

$745

$557

30

$785

$641

40

$1,458

$1,157

50

$3,467

$2,540

60

$8,462

$5,828

70

$32,708

$27,580

Source: Covr Technologies. Lowest three rates for each age averaged. Data valid as of May 31, 2024.

Permanent life insurance pros and cons

Pros

Coverage typically lasts your entire life.

You can tap into the policy’s cash value while you’re still alive.

Depending on the policy you choose, you might be able to combine the cash value growth with the death benefit, increasing the payout when you die.

Cons

Permanent policies cost significantly more than term life policies.

Universal and variable policies require careful monitoring to ensure the cash value performs well and the policy stays in force, making them riskier than term life policies.

If you borrow from the cash value and don’t pay it back, the insurer typically reduces the death benefit by the same amount.

Is permanent life insurance worth it?

Longevity, cost and flexibility are just a few of the factors to consider when shopping for permanent life insurance. Permanent policies may be worth it for people who:

Permanent life insurance is typically more expensive than term life insurance because of the lifelong coverage and investment opportunities. And remember, certain policies require detailed investment attention, something you may not have the time or inclination to give.

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