The Details

When you buy permanent life insurance, one of the first choices you make is how much coverage to get. You can multiply your annual income by seven for a quick estimate, or use our more exact life insurance calculator to figure this out.

Permanent life insurance also builds cash value you can tap into. With permanent life insurance, part of your premium pays the cost of the death benefit, and part is set aside in an account that’s attached to the policy. That account grows in value over time, and you can access that cash as you need it.

Whole Life
This is the simplest form of permanent life insurance. You'll pay the same premium for the rest of your life. (Start young and the premiums will be less expensive.)

Your cash value grows based on a guaranteed rate. As long as you’ve paid your premiums, you can borrow against the cash value like you’re taking out a loan. Then, you can pay it back at the current policy loan interest rate.

Universal Life
Universal life gives you more flexibility than Whole Life. Once your policy has built up cash value, you can decide when and how much you want to pay.

So how does this work? As long as you have enough cash value to pay for your policy’s insurance charges, your coverage stays in force. You can even skip payments if you’ve built up enough cash value to cover the premium. This gives you the ultimate flexibility in when and how much to contribute to your policy each year.

And if your needs change, you can also increase or decrease your death benefit amount within certain limits without buying a new policy (though you might need to get a medical exam).

Variable Universal Life
This gives you the option to invest your premiums—which means you can get a higher rate of return than a guaranteed rate, but there’s also a risk that your cash value could go down too. No matter what, the amount of your death benefit is safe.

Equity-Indexed Universal Life
With Equity-Indexed Universal Life, your cash value will be linked to changes in a widely recognized market index like the S&P 500®. Your policy will decide in advance what the maximum and minimum growth rates are.

Why It's a Good Idea

And, the premiums you pay could also have tax-deferred cash value. That’s something you can put to work for you while you’re still alive if you need it. It can help with the costs of education, retirement needs, or emergencies.

Factors to Consider

• You don’t want to worry about your coverage expiring
• You want a policy that can provide cash value that offers certain tax advantages
• You may need access to your cash value for needs like college tuition or retirement income

Common Questions

What is “cash value”?
Cash value is the money within your permanent life insurance policy that grows tax-deferred. The growth rate will be defined by the terms of your policy.

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