Permanent life insurance: What type is right for you?
Understand your options
Life insurance. You know you need it. But it can make your head spin trying to understand your choices.
Permanent life insurance options have expanded over the years.1 You can pair permanent with term insurance coverage, or use it alone to meet your own needs.
The beauty of permanent life insurance is you can’t outlive your coverage … as long as you pay your premiums, of course. The life insurance death benefit is tax-free money. And you have the potential to build cash value that you can use over the years as you see fit.
Comparing four types of permanent life insurance
|Whole life insurance2||Universal life insurance||Indexed universal life insurance||Variable universal life insurance|
|Premium||Fixed—never goes up||Flexible—you can change the amount you pay, if needed||Flexible—you can change the amount you pay, if needed||Flexible—you can change the amount you pay, if needed|
|Death benefit||Fixed, for life||Flexible—you can change the amount of coverage you have, within limits||Flexible—you can change the amount of coverage you have, within limits||Flexible—you can change the amount of coverage you have, within limits|
|Cash value||Guaranteed cash value typically grows at a rate that equals the death benefit at age 100||Accumulates cash value based on a fixed interest rate set by the life insurance company; has a guaranteed minimum||Accumulates cash value based in part on movement of a linked stock market index; has a maximum and minimum rate that can be earned||Accumulates cash value based on market performance; there’s no limit to earnings or loss potential|
|Can borrow from policy||Yes||Yes||Yes||Yes|
|Risk tolerance||Low||Medium to low (with additional guarantees for death benefit)||Medium to high||Medium to high|
|Cost||High||Medium to low||Medium||High|
When permanent life insurance might be a good fit for you
In certain situations, permanent life insurance may be a good fit for you, such as when:
- You have a partner, spouse and/or family who depends on your income.
- You’re a young investor willing to take risks and stay the course for more potential cash value.
- You already have a term life insurance policy and want to transition a portion to something more permanent.
- You have a high net worth, and want life insurance for estate or inheritance tax reasons.
- You want a life insurance benefit for your heirs, no matter when you die.
- You’ve maxed out your 401(k) and Roth IRA, and want to diversify how your assets are taxed and have more choice in tapping future money.
1 All guarantees and benefits of insurance policies are backed by the claims-paying ability of the issuing insurance company; they are not backed by the broker/dealer.
2 Principal does not offer a whole life insurance product.
Before investing, carefully consider the investment option objectives, risks, charges, and expenses. Contact a financial professional or visit principal.com for a prospectus or, if available, a summary prospectus containing this and other information. Please read it carefully before investing.