The Pros And Cons Of Permanent Life Insurance
Pros:
- It is not subject to cancellation unless the premium is not paid
- It endures for the life of the policy holder
- It is a type of investment
- Tax benefits may apply
Cons:
- It is expensive
- Commissions and fees may be high
- Policies are complex
Permanent life insurance is more expensive than term life insurance because it is effective during the entire life of the policyholder (as long as the premiums are paid) and the excess paid into the policy is invested. In general, the premium remains the same over the entire length of the policy. The excess that accumulates from the premium may yield dividends or interest; the policy holder will receive some of this return. The policyholder can choose to apply the investment income to the reserves, borrow against the cash value, or terminate the insurance policy and receive the cash surrender value. The growth in the value of the reserve is tax deferred under federal tax law, unless the policyholder receives the money. In some cases, a partial withdrawal will escape tax liability.
Permanent life insurance is beneficial for someone with a child with special needs or for someone that expects estate taxes to be high.
Reference: FindLaw
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