Back to top
  Try Smart Search An intelligent search tool to help you find the info you're looking for. Try it now
< Start Over Welcome to Smart Search Quickly locate tools, tips, resources, insurance information and more. Smart Search For example: car insurance tips or common claims Popular Searches


Permanent Life Insurance 101

Updated: September 2017

Permanent life insurance policies offer a death benefit and cash value. The death benefit is money that's paid to your beneficiaries when you pass away. Cash value is a separate savings component that you may be able to access while you're still alive.1 Permanent life insurance lasts from the time you buy a policy to the time you pass away, as long as you pay the required premiums.


Video Transcript

Life doesn't come with any guarantees… that's why there's life insurance. Life insurance can help provide financial security for the people you care about if you are gone.

If you pass away, a life insurance payment can help your loved ones cover medical bills, funeral costs, mortgage or rent, college tuition, and many other living expenses.

Life insurance policies typically fall into two categories: term insurance or permanent insurance. Which type of life insurance policy is right for you?

A term life insurance policy is like renting a home. You choose the length of time - the ‘term' of the policy - and the amount of coverage, and your payments stay the same until the end of your term.

Once your term policy expires, you may have the option to renew your policy with higher premiums or apply for a new life policy. Some policies even allow you to convert to a permanent policy.

A permanent life insurance policy is more like buying a home. It offers lifelong protection, the ability to build cash value, and the flexibility to adjust your policy if needed.

With each payment you make to a permanent life insurance policy, part of your premium goes toward insuring your life, and part goes toward building cash value… that can be used to take out a loan, make a withdrawal, or even skip a payment. Loans or partial withdrawals can reduce the policy's cash value and death benefit, increase the possibility of policy lapse and may result in a tax liability. Consult a tax advisor for more information on the tax treatment of loans or withdrawals from a life insurance policy.

Have questions about which life insurance policy is right for you? Contact your local Allstate agent today.

(Hand writes: www.Allstate.com)

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.

What Is the Difference Between Term and Permanent Life Insurance?

Term life and permanent life are the two main types of life insurance policies. While permanent insurance lasts your entire life, term insurance lasts for a set time period that you choose when you buy a policy — say 10, 20 or 30 years.

Life insurance infographic.

Basic Features of Permanent Life Policies

An essential feature of most permanent life policies is a savings portion known as 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 death benefit. While the cash value is a savings that accumulates over time, the death benefit is the amount of money that your designated beneficiary will receive upon your death. If you cancel your life insurance policy, you will get the accrued cash value. However, you could be assessed a surrender charge for cancellation early in your policy, so be sure to check with your agent first.

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 these common forms of permanent life insurance and their unique features:

  • 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 policies typically include a variety of investment options that may 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. Variable universal life policies also offer adjustable death benefit and premiums.
  • Indexed universal life insurance comes with no fixed interest rate on your cash value, which could increase the potential for greater gains or losses from your investments. On the other hand, most indexed universal life policies also include a minimum interest rate guarantee.

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.

A man talking on a phone.

You Can Count On A Local Agent.

An Allstate agent can answer coverage questions and help you find ways to protect what matters most.

Find an agent

Related Resources:

This content is for informational purposes only and may not be applicable to all situations.

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 accessallstate.com. Please read the prospectuses carefully before purchasing a policy.

ECC Monitor: OK