Lifetime Insurance Policy: Everything You Need to Know

When it comes to insurance policies, one size does not fit all. While some people may only need coverage for a short period of time, others may require lifelong protection. That’s where lifetime insurance policies come into the picture. In this article, we’ll delve into what lifetime insurance policies are, what they cover, and how they work to help you make an informed decision.

What is a Lifetime Insurance Policy?

A lifetime insurance policy, also known as a permanent life insurance policy, provides coverage for your entire life. Unlike term life insurance policies which are only valid for a specific period of time, permanent life insurance policies have no expiry date. This policy offers an assurance that no matter when you pass away, your family will receive a payout to protect them financially.

Lifetime insurance policies are typically more expensive than term life insurance policies, but they offer several unique features that make them appealing to those who need long-term coverage.

Types of Lifetime Insurance Policies

There are two main types of permanent life insurance policies: whole life insurance and universal life insurance.

Whole Life Insurance

A whole life insurance policy provides coverage for the duration of your life and also accumulates cash value over time. The premiums on this policy are typically higher than universal life insurance policies, but the payout is guaranteed and the premiums remain level throughout your life.

The cash value that accumulates over time can be invested and can grow over time. This can be a source of additional income, but there are rules and regulations surrounding how the money can be withdrawn.

Universal Life Insurance

A universal life insurance policy is also valid for your lifetime, but it provides more flexibility than a whole life insurance policy. The premiums are lower and can be adjusted, which allows you to change the amount of coverage you have throughout your lifetime.

The cash value that accumulates in a universal life insurance policy is invested in a separate account with stocks, bonds, and money market funds, which can impact the growth and variability of the policy’s cash value.

How Does a Lifetime Insurance Policy Work?

When you purchase a lifetime insurance policy, you pay regular premiums to the insurance company. This money is invested by the insurance company and a portion of it goes towards the cost of the policy, while the rest goes towards building cash value.

When you pass away, your beneficiaries will receive a payout known as the death benefit. The death benefit is paid out tax-free, and the amount depends on the policy’s value at the time of your death.

If you have a whole life insurance policy, you can also borrow against the cash value of the policy. This can be useful in situations where you need money for an emergency expense, but keep in mind that borrowing against the policy can reduce its overall value.

Who Needs a Lifetime Insurance Policy?

Lifetime insurance policies are typically best suited for those who want to ensure their loved ones will be provided for financially after they pass away. If you have a spouse or children who depend on you financially, a lifetime insurance policy can provide financial security and peace of mind.

Additionally, if you have an estate that will be subject to taxes upon your death, a lifetime insurance policy can be used to pay those taxes so that your beneficiaries don’t have to sell off assets to cover the costs.

Lifetime Insurance Policy FAQ

How much does a lifetime insurance policy cost?

The cost of a lifetime insurance policy varies depending on the type of policy and the coverage amount. Expect to pay more for a policy with a higher coverage amount.

Can I change my coverage amount?

If you have a universal life insurance policy, you can change the coverage amount throughout the life of the policy. If you have a whole life insurance policy, you cannot change the coverage amount.

What happens if I miss a premium payment?

If you miss a premium payment, your policy may lapse, which means you will no longer have coverage. To reinstate your policy, you may need to pay a reinstatement fee and provide proof of insurability.

Can I borrow against the cash value of my policy?

If you have a whole life insurance policy, you can borrow against the cash value of the policy. However, keep in mind that doing so can reduce the overall value of the policy.

Can I cancel my lifetime insurance policy?

Yes, you can cancel your lifetime insurance policy at any time. However, keep in mind that you may only receive a portion of the cash value of the policy if you cancel before the policy’s maturity date.

Conclusion

A lifetime insurance policy offers peace of mind that your loved ones will be taken care of after you pass away. While it may be more expensive than a term life insurance policy, it provides coverage for your entire life and accumulates cash value over time. Before purchasing a lifetime insurance policy, weigh the costs and benefits to determine what type of policy is best for you and your family’s needs.