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Permanent Life Insurance 101

Published: July 2015

When you're shopping for life insurance, you may hear about permanent life insurance policies. Quite simply, a permanent life policy can provide coverage for the rest of your life — unlike term life insurance, which covers you for a certain number of years. Read on to learn more about the basic features and variants of permanent life insurance policies.
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Basic Features of Permanent Life Policies

One of the most essential features of permanent life policies is a savings portion known as their cash value. Cash value accumulates over time as you make regular payments toward your policy (these payments are known as premiums). You can typically borrow against your policy's cash value, which accumulates on a tax-deferred basis.1

The cash value is different from the policy's face value, says Investopedia. While the cash value is a savings that accumulates over time, the face value is the amount of money (or the death benefit) that your designated beneficiary will receive upon your death. If you cancel your life insurance policy, you will get the accrued cash value. You could be assessed a surrender charge, however, for cancellation early in your policy, so be sure to check with your agent first.

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Types of Permanent Life Insurance

Though all forms of permanent life insurance are designed to be kept for the remainder of your life, there are several differences among the types of policies. Consider the unique features of these common forms of permanent life insurance:

  • Whole life insurance is the most common type of permanent life insurance, according to the Insurance Information Institute (III). Typically, a whole life policy's premiums and death benefit stay fixed for the duration of the policy. Whole life policies have a guaranteed rate of return, according to Life Happens. That means the cash value of a whole life policy is guaranteed to earn a minimum amount of interest. Some whole life policies also pay out dividends. You may use dividends to reduce premiums, receive them as cash or leave them to accumulate interest.
  • Universal life insurance offers greater flexibility than whole life policies, says the III. For instance, universal policies may allow you to increase your death benefit2 or reduce your monthly premiums once you accumulate sufficient cash value in your policy. Understand, however, that if you use up your cash value by applying it to premium payments, your policy may lapse.
  • Variable universal life insurance3 offers flexible death benefit and premiums, like universal life. In addition, variable universal policies offer a variety of investment options to help increase the cash value of your policy. The III advises, however, that investment losses can also reduce the policy's cash value and, subsequently, its death benefit.
Permanent life insurance can be an important tool to help secure your family's financial future. Have questions about the different types of policies? Get in touch with a life insurance agent, who can help you assess the options and choose a policy that's right for you.

Life Insurance offered through Allstate Life Insurance Company, Northbrook, IL; Allstate Assurance Company, Northbrook, IL; Lincoln Benefit Life Company, Lincoln, NE and American Heritage Life Insurance Company, Jacksonville, FL. In New York, life insurance offered through Allstate Life Insurance Company of New York, Hauppauge, NY.

Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. (877) 525-5727. Check the background of this firm on FINRA's BrokerCheck website.

1Loans or partial withdrawals can reduce the policy's cash value and death benefit, can increase the possibility of policy lapse, and may result in a tax liability. Consult a tax advisor for additional information on the tax treatment of loans or withdrawals from a life insurance policy.

2Increases in benefits are subject to underwriting approval. Changes to benefits can have income tax consequences. Consult a tax advisor for additional information.

3Variable universal life products are long-term investments designed to provide life insurance protection and flexibility in connection with premium payments and death benefits. You should carefully consider the investment objectives, risks, charges, and expenses of the investment alternatives before purchasing a policy. These policies have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, policy features, the underlying portfolios, fees, charges, expenses, and other pertinent information. To obtain a prospectus or a copy of the underlying portfolio prospectuses, please contact Allstate Life Insurance Company of New York or go to Please read the prospectuses carefully before purchasing a policy.

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