Pros and Cons of Permanent Life Insurance
What is Permanent Life Insurance?
A Permanent Life Policy is a contract between the owner of the policy and the insurer, where the insurer of the policy agrees to pay a lump sum amount of money at the time of the insured’s demise. The policy owner will agree to pay a premium at regular intervals or a lump sum in return for this agreement. The Permanent Life Insurance policy is best if you want to give your loved ones a financial security blanket once you are gone so that they don’t struggle or you want to leave the legacy for them.
Pros of Permanent Life Insurance:
- Coverage for your entire life: One significant advantage of purchasing a Permanent Life Insurance policy is providing coverage for your whole life. It also have cash value which can be used by you, and also ensuring your beneficiaries are financially secure after your death.
- Your cash value grows: Most Whole Life Insurance Participating policies have a cash value component that helps your policy grow and helps hedge against inflation. It will help to make the cash value of your policy worth more. Also, as your policy’s cash value grows, you can use this money as your retirement income. You can also take loan against your Cash Values.
- Premium payments are flexible: You can stop making payments and start enjoying the coverage benefits with a few Permanent Insurance Policies. For example, specific life insurance policies may allow you to pay higher premiums for a shorter period, such as ten years. Then you will not be asked to pay a policy premium again.
- Offers a variety of tax advantages:
- Tax-free death benefit
- Tax-deferred Cash Value Growth
- Income Tax-Free Dividends
- Tax-free Policy Loans
Cons of Permanent Life Insurance:
- It is Expensive: One of the most significant disadvantages to a Permanent Life Insurance policy is more expensive than Term Life Insurance. Individuals do not need coverage past a specific period. Therefore, most purchase a term insurance policy as it allows them to convert if they need coverage for a more extended period.
- Possibility of your policy to lapse: If you happen to miss out or cannot afford to pay your monthly premiums, your policy could cancel. If your policy cancels, you will be required to buy another policy and start all over again, possibly at a higher premium.
The Bottom Line:
Buying the right Permanent Life Insurance policy can be tricky. That’s why most individuals mistakenly pick a policy that does not suit their best interests. Before committing to purchase a Permanent Life Insurance policy, make sure you know what you’re getting. Give Harpreet Puri a call today on 416 543 9000 to find out more information or schedule a consultation.