Permanent life insurance provides a death benefit and a corresponding cash account. Three types of permanent life insurance are normally sold on the marketplace: ordinary whole life, universal life, and variable life. Because of the additional benefit attributable to the policy cash value, whole life, universal life and variable life are often 5 to 10 times the price of a term life policy and not usually affordable in large enough face amounts for a young family or person. Many consultants believe that unless you intend to keep your life insurance in force for more than twenty years, term life is the most appropriate life insurance to buy. Since your needs will change over time, as children leave the nest and other obligations such as education loans and your home get paid off, your need for life insurance is likely to decline. Keeping enough insurance in force for those who want to avoid having to liquidate an estate to pay death taxes is likely to be a recommendation of many estate planners.

One of the major features of a universal life insurance policy is the ability of the policyholder to adjust the annual (or monthly) premium based on their needs. Since the policy has been accumulating cash in a separate account, the money can be used to pay the mortality and expense charges if the policyholder decides to lower (or even eliminate) their insurance premiums for a set period of time. Universal life insurance plans can also have the ability to invest the cash account in variable investments (i.e. stocks, bonds, mutual funds). These variable universal life insurance plans are much riskier because the cash account value can reduce if the investments have negative returns.

After reviewing the different types of permanent life insurance, which type should your family purchase? Should permanent life insurance be offered by employers as a voluntarily-purchased benefit?