What is Permanent life insurance?
Permanent life insurance has premiums that are level for life. They will always remain the same.
There are 3 types of Permanent life insurance:
Universal, Whole life, and Term to 100.
Universal Life Insurance
Similar to Whole life in that there is a 'reserve' in the policy in the early years due to level payments
over your lifetime. However, the balance is invested based on your objectives and tolerance for risk.
It is flexible in that you can adjust your premium payments over time.
In this type of insurance the 'reserve' amount is not guaranteed and fluctuates with the funds in which
t was invested.
How does it work?
The underlying cost of all life insurance goes up every year as we get older. However, if the insurance company were to average your costs of insurance over your entire lifetime, then the premiums would be the same for the entire course of your life.
For more information, please contact me, Cary Fox. 416-380-2221
Whole Life Insurance:
In the early years of the policy the premiums are actually higher than the company’s costs, since you
are young and the risks are low. Unlike most products we buy, life insurance companies don’t take that additional premium and put it into their annual profit. Instead, they take that additional money and
save it up (it’s called ‘reserving’) inside your policy. These premiums that you pay above the base cost
of insurance in the early years then build up inside your policy. In the policy later years when costs exceed your premiums, those reserves are then used to handle the additional cost of life insurance
at the later ages.
So what happens if you cancel your policy? The insurance company will actually refund you a percentage of that reserve.
This refund of your over-payment of premium is called a cash surrender value or cash value.
Independent Insurance Broker
Term to 100 Life Insurance
This is a hybrid of Term and Permanent insurance. By removing the cash value component and
retaining the level premiums for life, it allows for premiums lower than the Whole Life model.