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Permanent life insurance: The key to long-term financial security

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Written by Nigel Simpkins

Sometimes it’s best to keep an eye on things for the long term, especially your finances. Permanent life insurance is one of the most efficient to achieve long-term financial security. Not only does it give you peace of mind, it allows you to focus on other aspects of life.

If you’re the breadwinner of your household, think about what could happen if you suddenly died. How would your family cope without insurance? Let’s take a deeper look into permanent life insurance, how it works, and the benefits it can offer you and your loved ones.

How Permanent Life Insurance Works

Permanent – or whole life insurance – is a type of life insurance that never expires. Unlike a standard term policy, it’s designed to last for as long as you need it. Then, when you die, a cash lump sum is paid to your family.

Though cover is permanent, it relies on your monthly premiums to your insurer. Failing to do so will see them cancel the policy.

There are two main types of whole life cover:

  • Standard: Both premiums and death benefit remain the same throughout the policy. It won’t be affected even as you age or develop health issues.
  • Index-linked: The insurer places the money from your premiums in an investment fund. This can have positive and negative effects on your policy.

Ultimately, it depends on whether you want to take a risk or prefer a steady policy that you can rely on.

Benefits of Permanent Life Insurance

Permanent life insurance is great for those looking for long-term security. Several advantages come with choosing this type of policy:

  • Financial Security: The lump sum from your policy can help your family with many financial aspects in your absence.
  • Lifetime cover: This means that no matter how much you age or what health issues you may develop, your policy will remain in place and protect your family if something happens to you.
  • Fixed premiums: Your premiums will remain the same throughout the policy. This makes budgeting easier as premiums won’t increase due to age or health issues.
  • Investment opportunities: With some whole policies, part of your premium is placed into an investment fund by the insurer. If this performs well, bonuses can be added to your policy.

Factors to Consider When Choosing Permanent Life Insurance

When choosing a permanent life insurance policy, there are several factors you should take into consideration. 

The type of cover and the provider are two key areas to think about as well as these five factors:

  • Amount of cover: This will depend on your individual circumstances and the amount of money required to financially support your family in the event of your death.
  • Premiums: Before committing to a policy, make sure you can afford the premiums over the long term. These vary depending on your age, health and lifestyle.
  • Benefits: Different policies offer different benefits. Make sure the policy you choose offers the right amount of cover for your needs.
  • Inflation: As prices rise over time, make sure that the death benefit is adjusted to keep up with inflation.
  • Investment performance: If you’re opting for an index-linked policy, you should regularly monitor it’s performance. This can help you make sure your premiums are not increasing because of poor performance.

Do I need a joint policy?

Life insurance doesn’t have to be for just one person. With a joint policy, both you and your partner or spouse can be protected. It’s ideal for couples who want to make sure their family is financially secure in the event of both of their deaths.

Joint policies can be cheaper than two separate policies, as you are only paying one set of premiums. It’s important to remember that the death benefit will be paid out only once and not twice. This means that if there are dependents involved, they may not be adequately provided for.

It’s worth considering the pros and cons of taking out a joint policy, before deciding if it is right for you. Also, consider any joint finances such as a mortgage, so you are both able to cope with the support of the other.

Applying for cover

Once you know what you need and have found the right provider, you can start the application process. Most of the time this will involve completing an application form with all of your personal and medical information. The insurer may also ask for additional documents such as proof of address or bank statements.

After submitting your form, the insurer will assess your application to decide whether to offer you cover and at what cost. It’s really important to be honest when filling in your details. Make sure you disclose any medical conditions or medication you are taking, as this could affect the cost of your premiums.

Providing false information could see your policy cancelled, or worse still, your family could be denied a claim after your death.

It also never hurts to get advice from an insurance advisor or broker. They can help you make sure that the policy you choose is right for your needs and budget. Remember, it’s worth getting covered for the long haul, so make sure you get the right plan.