If you own life insurance as part of your overall financial plan, you’re taking an essential step in protecting your loved ones’ financial future. As you explore the different types of coverage, you’ll likely come across products referred to as “permanent life insurance.” There are several types of permanent life insurance, each with unique features and benefits that may be a good fit for your needs. Let’s take a closer look at this type of life insurance and how to determine if it’s the right coverage for you.
Permanent life insurance policies cover your entire life, from when you purchase the policy to when you pass away, as long as you pay your required premiums. Some types of permanent life insurance include a savings portion where you can build cash value over time. This cash value can then be accessed to help with various needs, like paying for unexpected expenses, helping fund a child’s education, or supplementing your retirement income.
Unlike term life insurance, which provides coverage for a specific number of years, permanent life insurance lasts your entire lifetime. As long as you keep up with your premium payments, your coverage will never expire.
Each time you pay your premium, a portion goes toward maintaining the policy’s death benefit and another goes toward your cash value. This cash value can earn interest and grow tax-deferred, which means you do not pay taxes on any earnings as long as the policy remains active. Typically, there is a waiting period after the purchase of the policy before you can withdraw funds. With coverage in place, your beneficiaries will receive a death benefit when you pass away to help pay funeral costs, replace lost income, or assist with medical bills or other expenses.
While all permanent life insurance is designed to provide coverage for your entire life, there are different types of permanent coverage with their own unique features.
Offers basic death benefit coverage to help ease the financial burden of funeral costs and other final expenses. You pay a set premium amount that will not increase as you age or if you experience a change in your health status. The policy can build cash value at a guaranteed rate over the life of the policy.
If you’re looking for more flexibility, universal life insurance offers greater flexibility than whole life insurance. You may be able to adjust your premium amounts or choose a payment schedule that works best for you. In addition, if you wish to build your cash value quicker, many UL policies allow you to pay more than the minimum for faster cash value accumulation.
Similar to universal life insurance, an IUL policy offers cash value growth potential. You can choose your premium payments to be allocated to a fixed account, an index account, or a percentage of each. The fixed account earns interest at a set rate, and the index account earns interest based on market performance (subject to a cap or maximum interest rate used in calculating the index credit and participation rate for the product). A zero percent floor protects you against negative market performance. The interest credited to an index account is based on the performance of the index, and is not directly invested in the stock market.
Permanent life insurance can offer valuable protection to your loved ones while building cash value for your needs in the future. To explore the features of permanent coverage and determine which type of policy may be a good fit, consider meeting with a financial professional to discuss your financial goals and life insurance needs and find coverage that is right for you.
Neither Midland National® Life Insurance Company nor its agents give tax advice. Please advise your customers to consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.
Income and growth on accumulated cash values is generally taxable only upon withdrawal. Adverse tax consequences may result if withdrawals exceed premiums paid into the policy. Withdrawals or surrenders made during a Surrender Charge period will be subject to withdrawal charges, processing fees, or surrender charges, and may reduce the ultimate death benefit and cash value. Surrender charges vary by product, issue age, sex, underwriting class, and policy year.
Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation.
Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write Midland National One Sammons Plaza, Sioux Falls, SD, 57193. Telephone 800-923-3223
The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.