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Permanent life insurance provides coverage that lasts your entire life with a cash value component that grows over time. Unlike term insurance that expires, permanent policies guarantee a death benefit whenever you pass away—whether that's next year or in 30 years.
For retirees, permanent life serves specific purposes: guaranteed final expense coverage, leaving a legacy, estate planning, and building accessible cash reserves for emergencies or long-term care needs.
Structure: Fixed premiums that never increase. Guaranteed cash value growth on a predetermined schedule. Level death benefit. Potential dividends from mutual companies.
Predictability: Everything is guaranteed—premium amount, cash value growth rate, death benefit. No surprises.
Cash Value Growth: Guaranteed minimum (typically 2-4% annually) plus potential dividends. Conservative, stable accumulation.
Best For: People who want certainty, guaranteed values, and predictable lifetime premiums.
2026 Cost (Age 65): $100,000 whole life costs $350-600/month depending on payment structure.
Structure: Flexible premiums within guidelines. Adjustable death benefit. Cash value growth tied to insurance company interest rates.
Flexibility: Pay more to build cash value faster, or pay less if sufficient cash value exists. Increase or decrease death benefit as needs change.
Cash Value Growth: Based on current interest rates credited by insurer (typically 3-5%). More variable than whole life.
Best For: People who want premium flexibility or may need to adjust coverage over time.
2026 Cost (Age 65): $100,000 universal life costs $250-500/month depending on funding level.
Part of each premium goes toward insurance costs and company expenses. The remainder accumulates as cash value that grows tax-deferred.
Cash Value Growth Timeline:
Example: $100,000 whole life policy at $400/month. After 15 years: approximately $50,000-70,000 cash value. After 25 years: approximately $100,000-130,000 cash value.
Accessing Cash Value:
Policy Loans: Borrow against cash value at rates set by policy (typically 5-8%). No credit checks, no applications, no repayment schedule. Interest accrues. If not repaid, loan reduces death benefit.
Withdrawals: Take cash out directly. Amounts up to premium basis (what you've paid in) are tax-free. Amounts above basis are taxable. Permanently reduces death benefit.
Surrender: Cancel policy and take full cash value. Policy ends. May face surrender charges in early years. Gains above premium basis are taxable.
Premiums are significantly higher than term because you're paying for lifetime coverage plus cash value accumulation.
Whole Life (Age 65):
Universal Life (Age 65):
Women typically pay 10-15% less than men due to longer life expectancy.
Cost Factors: Age, gender, health, tobacco use, policy type, coverage amount, and payment structure all affect premiums.
Pay premiums for a specific period, then coverage continues for life with no more payments. Options: 10-Pay (higher premiums, $600-1,000/month for $100,000), 20-Pay (moderate premiums), or Paid-Up at 85. Best for people wanting to eliminate premium obligations before/early in retirement. Trade-off: higher premiums during payment period versus paying until death.
Final Expense Coverage: Guaranteed funds for funeral and burial regardless of when you die. Coverage you can't outlive.
Estate Planning: Provide liquidity to pay estate taxes without forcing sale of property or investments. Equalize inheritances among children when leaving a business to one child.
Legacy Planning: Guarantee specific amounts to children, grandchildren, or charities. Leave $50,000 to each grandchild for college, guaranteed.
Supplemental Retirement Income: Build cash value during working years, access it tax-advantaged through policy loans during retirement.
Business Succession: Fund buy-sell agreements or key person insurance with permanent policies that build cash value.
Charitable Giving: Name charity as beneficiary or donate paid-up policy for immediate tax deduction.
IUL ties cash value growth to stock market index (typically S&P 500) with downside protection. Floor and cap structure: if index returns 15%, you get cap (10-12%). If it returns -10%, you get floor (0%). Best for people wanting market upside with downside protection and 10+ year time horizon. More complex than whole/universal life. 2026 Cost (Age 65): $100,000 IUL costs $300-550/month.
Many permanent policies include chronic illness riders that let you access the death benefit early if you need long-term care.
Chronic Illness Rider: If you can't perform 2 of 6 daily activities (bathing, dressing, eating, toileting, transferring, continence), access a portion of death benefit to pay for care.
How It Works: Typically receive 2-4% of death benefit monthly for care costs. Example: $100,000 policy provides $2,000-4,000/month for long-term care. Benefit reduces death benefit dollar-for-dollar.
Why This Matters: Addresses Medicare's biggest gap (long-term custodial care) without buying separate long-term care insurance. Gives you three ways to use the policy: cash value access during life, long-term care funding if needed, or death benefit for beneficiaries.
Mutual insurance companies may pay dividends (not guaranteed but historically consistent). Options: receive as cash, reduce premiums, buy paid-up additions (increases death benefit and cash value), or accumulate at interest. Paid-up additions are most effective for maximizing policy value long-term.
Most permanent policies have surrender charges in years 1-10. If you cancel early, you receive cash value minus surrender charge. Charges decrease annually and eventually disappear. Policy loans don't trigger surrender charges—if you need money in early years, borrow against cash value instead of surrendering to avoid charges.
Permanent life insurance provides lifetime protection with cash value accumulation. While premiums are higher than term, permanent policies guarantee coverage that never expires and build a financial asset you can access during retirement. It's particularly valuable for final expense planning, leaving a guaranteed legacy, and estate planning.
At A&E Insurance Agency, we help you understand the differences between whole life, universal life, and indexed universal life. We'll compare costs, explain cash value growth projections, review living benefit riders, and help you determine if permanent coverage fits your goals and budget. Schedule a free consultation to explore your permanent life insurance options.
