Permanent Life Insurance

Permanent life insurance protects the insured for their entire life, and the premiums paid remain the same throughout the life of the contract.

There are different types of permanent life insurance, which we explain below:

• 100-Year Term (Term 100)
• Whole Life
• Universal Life
• Permanent life insurance with fixed-term payments of 10, 15, or 20 years

This insurance differs from the first because it accumulates a reserve of money that increases over the years, called Cash Value. This reserve will begin accumulating in the second, fifth, or tenth year of your policy, as established by the contract.

The cash value has different uses: it can be used to increase the coverage purchased; This is the money you will redeem in full if you decide to cancel your contract. You can also borrow against the cash value within the policy or use it as collateral if you apply for a loan.

You can also, if you wish, stop paying on your policy and use the cash value to purchase certain coverage, always much less than the current coverage, or maintain your existing coverage by using this money to extend the payment years until the cash value is fully depleted.

Some Whole Life insurance policies may have an additional, non-guaranteed component called dividends, which will increase the total value of your cash value. You can also receive the dividends in cash if you wish.

How does it work? Insurance companies assume the risk and calculate the reserves they wish to maintain with the help of actuarial estimates. This reserve is reflected in the premiums you will pay monthly. At the end of the year, if the actuaries' estimates for death claims came in lower than expected, the surplus from this reserve is distributed as dividends, as an incentive to policyholders who have contributed to the principal capital through their payments.

This is a combination of insurance and investment opportunity, where your money grows tax-free. You can choose from different investment options, from guaranteed medium-growth, conservative, or more aggressive.

Upon the death of the insured, the benefit plus the savings in the investment account (if this option is selected in the policy) is paid to the designated beneficiary tax-free.

This is a complex and flexible insurance policy that requires detailed knowledge. It has two components: the cost of the insurance and the investment or savings.

There are Universal Life Insurance policies where the cost of the insurance will increase over the years, designed with the hope that the return on your investment will make up for the difference in the price of your premium in later years. If the return on your investment is negative and not as initially projected, you will need to contribute more money to your monthly payments to maintain your life insurance policy.

It is extremely important to periodically review the performance of your selected investments and understand the cost of Universal Life Insurance.