Permanent life insurance provides lifelong protection. As long as the premiums are paid, the policy will stay in force until a death benefit is paid. These policies are designed and priced to keep over a long period of time. They are generally recommended for people who believe they will have a lifelong need for life insurance coverage or for coverage that extends beyond the maximum allowed by term life insurance (currently 30 years).
Another characteristic of permanent life insurance is a feature known as cash value or cash-surrender value. In fact, permanent life insurance is often referred to as cash value life insurance because these types of policies can build cash value over time, as well as provide a death benefit to the beneficiaries.
Cash values, which accumulate on a tax-deferred basis just like assets in most retirement plans, can be used in the future for almost anything. Policy owners can borrow cash value for a down payment on a home, help pay for their children's education or provide income for retirement. When money is borrowed from a permanent life insurance policy, the policy's cash value is used as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other limitations. The loan must ultimately be paid back with interest or the beneficiaries will receive a reduced death benefit and cash surrender value.
If the policy owner needs or wants to stop paying premiums, the cash value can be used to continue the current life insurance protection for a specified time, or to provide a lesser amount of protection for the remainder of the policy. If the policy owner decides to stop paying premiums and surrenders the policy, the guaranteed policy values will be paid to him/her.
There are several types of permanent life insurance policies available including whole life, universal life and variable life. Each offers its own set of options and features including fixed or variable premiums, fixed or variable death benefits and policy loan provisions among others.