Permanent Life Insurance
Permanent life insurance is designed to provide protection for a lifetime. Because these policies can build cash value over time, they’re often used for long-range planning as well as protection. This guide explains how permanent life insurance works, the main policy types, and when it may or may not fit your goals.
Permanent Life Insurance
Permanent life insurance provides lifetime coverage, unlike term life insurance, which expires after a set period (typically 10 - 30 years).
Most permanent policies include a cash value component that can grow over time and help support long-term goals.
Different types of permanent life insurance vary widely in guarantees, flexibility, risk, and cost.
Choosing the right policy depends on budget, risk tolerance, and how much ongoing policy management you’re comfortable with.
What is Permanent Life Insurance?
Permanent life insurance is coverage meant to last your entire lifetime, not just a set number of years. If you’re wondering ‘what is permanent life insurance’ and how it’s different from term, think of it as coverage designed to stay in force, with the added potential to build cash value you can access under policy rules.
Features of Permanent Life Insurance
- Life insurance policy that lasts a lifetime, as long as policy requirements are met and premiums are paid.
- The potential to accumulate cash value, and the ability to access it through loans or withdrawals. Accessing your cash value can reduce the death benefit and may have tax implications.
- Premium structure that varies by product. Whole life is typically level and predictable; while universal life insurance is more adaptable.
- Option to add riders, which may increase cost but can add extra peace of mind. Riders are available on many types of life insurance.
- Fees and potential surrender charges may apply, especially in early years.
How Permanent Life Insurance Works
Permanent life insurance combines lifelong coverage with a cash value component that can grow over time. At a practical level, how a policy performs depends on a few core mechanics: how cash value is credited, how loans work, how premiums and costs are structured, and what optional riders may be added. The sections below explain each of these moving parts.
Cash Value Component
Cash value growth depends on the type of permanent policy. Whole life typically credits a fixed rate and may pay non-guaranteed dividends on participating policies. Universal life credits interest at a declared rate or through an index-based formula, while variable designs invest cash value in market-linked subaccounts that carry investment risk.
Cash value generally grows tax-deferred. Early surrender charges may apply, and withdrawing or borrowing against cash value can reduce both the policy’s value and the death benefit. Accessing cash value may also have tax consequences if you withdraw more than you paid in.
Policy Loans
Policy loans let you borrow against your cash value without a credit check. Loan interest accrues, and any unpaid balance (plus interest) reduces the death benefit and cash value. Large loans can cause a lapse if the policy isn’t adequately funded. In addition to loans, many permanent life insurance policies also allow cash value withdrawals, which permanently reduce the policy’s cash value and may reduce the death benefit.
Cost and Premium Structure
Permanent life insurance typically costs more than term life for the same death benefit because coverage doesn’t expire and includes a cash value feature. Whole life policies usually have level, predictable premiums. Universal life policies allow more premium flexibility within minimum funding requirements, but underfunding can reduce cash value and jeopardize policy guarantees.
Living Benefits and Riders
Many permanent life policies offer optional riders for an additional cost that allow coverage to be tailored. Common examples include
- Accelerated death benefit riders,
- Chronic illness
- Long-term care riders
- Waiver of premium riders
- Guaranteed insurability options
- Child term riders
Riders typically add to the overall premium cost, and some riders may reduce the policy’s value or death benefit when used. Availability varies by state, insurance company, and policy.
Read: How Much Does a $100000 Life Insurance Policy Cost?
Types of Permanent Life Insurance
Permanent life insurance comes in a few variations. Knowing the differences helps you match the policy to your goals and budget.
Whole Life Insurance
Whole life insurance provides lifetime coverage with fixed premiums and guaranteed cash value growth based on the contract. Common variations include:
- Participating whole life (dividend-eligible): May pay dividends that you can take in cash, use to reduce premiums, or buy paid-up additions. Dividends aren’t guaranteed.
- Non-participating whole life: Focuses on the guarantees in the policy, doesn’t pay dividends.
- Final expense whole life: Smaller, simplified or guaranteed issue policies often used for end-of-life costs.
- Limited-pay whole life: Premiums are paid for a set period (for example, 10-pay, 20-pay, or paid-up at 65), and the policy stays in force for life.
- Single-premium whole life: One lump sum premium funds the policy. However, many single premium designs may be classified as Modified Endowment Contracts (MECs), which can change how distributions are taxed. You should consult a tax professional if you’re considering purchasing this type of policy.
Universal Life Insurance
Universal life (UL) insurance offers lifetime coverage with flexible premiums and an adjustable death benefit, plus a cash value that earns interest. Some key sub-types are:
- Traditional (current assumption) UL: Credits interest at a declared rate that can change over time, within contractual minimums. Also called fixed UL.
- Guaranteed UL (GUL): Emphasizes no-lapse guarantees to keep coverage in force if funding rules are met; often behaves like “lifetime term” and has limited cash value.
- Indexed UL (IUL): Credits interest based partly on a stock market index and incorporates caps, floors, and participation rates; but does not invest directly in the stock market.
Variable Universal Life/Variable Life
Variable permanent life insurance links cash value to market-based investment options, which means performance can rise or fall over time. These policies require closer oversight and typically carry higher fees than fixed products. There are two main variable designs:
- Variable universal life insurance (VUL): Offers flexible premiums and, in many cases, an adjustable death benefit. Cash value is invested in market-based subaccounts, and the policy owner assumes investment risk. Because funding levels can change, regular monitoring is important to ensure the policy stays adequately supported. Some VUL policies offer optional no-lapse riders if specific funding requirements are met.
- Variable life (VL): Uses a more traditional policy structure with generally fixed or scheduled premiums, paired with investment subaccounts for cash value growth. Compared with VUL, variable life typically offers fewer premium-adjustment options, which can make funding more predictable. However, cash value remains exposed to market risk, and ongoing review is still required to manage performance and costs.
If you’re comparing across these types, focus on how premiums, guarantees, cash value behavior, and flexibility line up with your time horizon and comfort with risk and costs.
Read:
Permanent Life Insurance Cost
The average cost of permanent life insurance varies based on the type of policy, how it’s designed, and who’s applying. Since permanent policies include a cash value component and long-term guarantees or flexibility, pricing is less predictable.
Average Monthly Cost of a Permanent Life Insurance Policy
While rates vary widely, here are average monthly rates for 40-year-olds, with a range showing rates for men and women. These numbers show how costs can differ across common policy types and coverage amounts:
| Policy Type | $100,000 | $250,000 | $500,000 |
|---|---|---|---|
Whole Life¹ | $121 - $133 | $302 - $334 | $605 - $667 |
Traditional UL¹ | $51 - $59 | $127 - $147 | $254 - $294 |
Indexed UL² | $67 - $82 | $168 - $204 | $335 - $408 |
Costs for variable life and variable universal life policies span a broad range based on policy design, funding levels, and investment choices. Because these policies include market-based subaccounts and additional charges such as mortality and expense fees and subaccount expenses, variable designs are often more expensive than traditional or indexed universal life policies.
What Affects Permanent Life Insurance Cost?
Permanent life insurance pricing depends on more than just the death benefit amount. Policy design, personal factors, and how the coverage is structured all play a role in what you pay over time.
Key factors that influence cost include:
- Policy type: Permanent policies are priced differently based on guarantees, flexibility, and risk.
- Coverage amount: Higher death benefits generally mean higher premiums.
- Age and health: Younger, healthier applicants typically qualify for lower rates.
- Gender: On average, women pay less than men due to longer life expectancy (this means they will hypothetically pay premiums for more years).
- Premium structure: Level, limited-pay, or flexible premiums can change how costs are distributed over time.
- Cash value features: Policies with stronger guarantees or growth potential often cost more.
- Riders and optional benefits: Adding riders can increase overall premium.
Advantages and Disadvantages of Permanent Life Insurance
Permanent life insurance pairs lifelong protection with cash value, but it’s not one-size-fits-all. Review the features below to see how the trade-offs line up with your goals and budget.
Benefits of Permanent Life Insurance
- Lifetime coverage: Protection designed to last your entire life, not just a set term.
- Cash value accumulation: Builds value over time that you can access under policy rules.
- Predictable premiums (whole life): Level payments can make long-term budgeting easier.
- Flexible funding (some UL policies): Ability to adjust premiums and, in some cases, the death benefit within contract limits.
- Built-in guarantees: Whole life guarantees and certain no-lapse UL features can keep coverage in force as long as policy requirements are met.
- Tax-deferred growth: Cash value generally grows tax-deferred, and beneficiaries typically receive the death benefit income-tax-free.
- Optional riders: Features like accelerated death benefit, chronic illness, or waiver of premium can help tailor coverage.
Drawbacks of Permanent Life Insurance
- Higher cost than term life: Permanent policies typically cost more.
- Policy complexity: Different designs (WL, UL, IUL, VUL) involve varying charges, guarantees, and assumptions.
- Early surrender charges: Canceling a policy in the early years can trigger surrender fees that reduce any cash value paid out.
- Performance risk: IUL crediting depends on index formulas, and VUL cash value fluctuates with markets and fees.
- Ongoing funding discipline: Underfunding UL policies or carrying large loans can drain cash value and increase lapse risk.
- MEC risk if overfunded: Exceeding funding limits can cause a policy to become a Modified Endowment Contract (MEC), which changes how withdrawals and loans are taxed if money is taken out.
- Loan impact on benefits: Interest accrues, and unpaid loans reduce both cash value and the death benefit.
Expert Tip
Which permanent life insurance policies pay dividends, and how do whole life dividends work?
Not all permanent life insurance policies pay dividends. Dividends are specific to participating whole life insurance policies, which are issued only by mutual insurance companies. Dividends are paid in years when the insurer’s financial performance, investment results, expenses, and claims experience are favorable, but they are not guaranteed.
Policy owners can usually choose how dividends are used. You might take them in cash, use them to reduce premiums, leave them to accumulate interest, or purchase paid-up additions that increase the policy’s cash value and death benefit. Other types of permanent life insurance, including universal life, indexed UL, and variable policies, do not pay dividends, even though they may offer other forms of cash value growth.
Senior Director Life Underwriting
How Permanent Life Insurance Differs from Term Life
Term life is built for straightforward, time-limited protection; permanent life is designed for lifelong coverage and long-range planning. Here are some key differences between permanent vs. term:
| Feature | Term Insurance | Permanent Insurance |
|---|---|---|
Coverage duration | Covers a set period, usually between 10 and 30 years | Designed to last for a lifetime |
Cash value | No cash value | Can build cash value you may access under policy rules |
Cost | Usually lower premiums for the same death benefit; typically the most affordable | Higher premiums due to lifelong coverage and cash value accumulation potential |
Best for | Temporary needs like income replacement or mortgage protection | Long-term goals such as lifelong protection and estate planning |
Choosing the Best Permanent Life Insurance
There isn’t a single type of life insurance that works best for everyone. The key is understanding how policy features line up with your goals.
Permanent Life Insurance Options by Primary Goal
The best permanent life insurance policy depends on your primary purpose, budget, and tolerance for complexity or risk. Here’s a general guideline:
| Primary Goal | Best Policy Type | Key Considerations |
|---|---|---|
Guaranteed lifetime coverage | Whole life | Highest level of guarantees and predictable cash value, but has limited premium flexibility and higher costs. |
Lowest lifetime cost | Guaranteed universal life (GUL) | Coverage-focused design with minimal cash value, designed as ‘lifetime term.’ |
Cash value growth potential | Indexed UL or Variable UL | IUL limits downside through index caps and floors; VUL offers direct market exposure with higher growth potential and risk of loss of principal. |
Flexible premiums | Universal life-based policies | Most policies allow funding adjustments within policy limits; requires careful funding to avoid lapse. |
Estate planning or leaving a legacy | Whole life or GUL | Predictable death benefit can assist in long-term planning |
Direct market participation | Variable life or VUL | Cash value grows in market-based subaccounts and comes with higher risks and fees |
How to Choose the Best Policy for You
Choosing the right permanent life insurance policy comes down to how you balance guarantees, flexibility, cost, and long-term involvement. Use this checklist to narrow your options:
Guarantees vs. flexibility
Some policies emphasize guaranteed premiums and predictable cash value, while others trade guarantees for flexibility or growth potential.
Ongoing involvement
Whole life is typically set at issue, while universal life insurance policies and variable policies require periodic review to stay on track.
Primary goal
Decide whether your main objective is lifetime protection, cash value accumulation, estate planning, or a combination.
Long-term funding ability
Policies with flexible premiums still require consistent funding over time to avoid erosion or lapse.
Comfort with market risk
Fixed designs offer stability, while indexed and variable policies introduce market exposure and additional complexity.
Read: What are the Pros and Cons of Whole Life Insurance?
Is Permanent Life Insurance Right for You?
Permanent life insurance coverage can make sense when you want coverage that won’t end after a set term, and if you value the ability to build cash value over time.
When Permanent Insurance Can Make Sense
- Lifetime protection is a priority, such as covering final expenses, supporting estate planning, or leaving a financial legacy.
- Premium structure matters, whether that means fixed, predictable payments (whole life) or flexibility within defined funding rules (certain universal life designs).
- Cash value accumulation potential is appealing, with the understanding that access is subject to policy rules and may affect benefits.
- Long-term funding is realistic, and there is discipline to keep the policy properly supported over many years.
- Policy guarantees are valued, such as whole life guarantees or a no-lapse feature available on some universal life policies.
When Term Life Insurance May Be a Better Fit
- The main goal is maximizing death benefit at the lowest cost for a defined period, such as during mortgage years or while dependents are still at home.
- Cash value is not needed, or there is no desire to manage funding, loans, or long-term policy mechanics.
- A straightforward policy with fewer variables and lower premiums is preferred over lifetime coverage.
How to Tailor a Permanent Policy to Your Goals
- Match the policy type to your priorities. If you want guarantees and simplicity consider whole life, if you want flexibility and adjustable funding options you might choose UL. If you’re comfortable with market exposure and higher risk for a potentially larger return, consider VUL.
- Decide how you’ll fund your policy. Do you want level premiums, limited-pay schedules, or higher early funding, while being mindful of MEC thresholds and taxes? Choose a policy that fits your short- and long-term budget.
- Add riders only if they solve a real need, and confirm how each rider affects premiums and benefits.
The best permanent life insurance for your needs balances lifetime protection with a funding plan you can stick to. If you’re unsure, compare a permanent option to a term policy of the same death benefit so you can see costs and trade-offs side by side. You can get started with Ethos and find out what coverage may align best with your needs.
FAQs on Permanent Life Insurance
Permanent life insurance costs vary widely based on policy type, age, health, and coverage amount. Whole life typically has higher premiums due to guaranteed coverage and cash value growth.
Universal life designs may start with lower premiums but depend more on how the policy is funded and maintained over time. Because designs differ so much, costs are best evaluated by policy type rather than a single average number. It’s a good idea to compare various policy types across several life insurance companies.
There isn’t one ‘best type’ for everyone. The right choice for you depends on how much predictability you want vs. adaptability. Whole life emphasizes guarantees and stability, while universal life offers more flexibility in premiums and death benefit design. Policies with no-lapse guarantees prioritize keeping coverage in force, while others emphasize cash value growth or flexibility.
Permanent life insurance is designed to last for the insured’s lifetime, not a set term. Coverage continues as long as premiums are paid and policy requirements are met. Some policies rely more heavily on guarantees, while others depend on ongoing funding and performance to maintain coverage.
Yes, many permanent life insurance policies allow policy loans against available cash value. Loans are generally not taxable when taken, but interest accrues and reduces both the cash value and death benefit while outstanding. Loan terms and interest rates vary by policy and insurer.
It depends on the policy design. Whole life policies typically have level, guaranteed premiums. Universal life policies offer more flexibility, but required funding can change over time to maintain guarantees. Policies with no-lapse guarantees require meeting specific funding rules, while variable designs also reflect investment performance and cost factors.
Permanent life policies include a grace period during which coverage remains in force if a premium is missed. Some policies may use an automatic premium loan feature, depending on available cash value and policy provisions. If premiums are not addressed within required timeframes, the policy may lapse, which would end coverage and eliminate the death benefit.
Cash value growth timing depends on the policy type and how it’s funded. Whole life policies begin building cash value gradually and predictably. Universal and variable designs may build cash value more slowly or unevenly in early years due to costs and policy structure. In almost all cases, meaningful accumulation typically takes time and consistent funding.
Permanent life insurance is designed for protection, not a standalone investment. It can provide tax-deferred cash value growth and long-term protection, but returns are generally lower and less liquid than traditional investment accounts. Its value is strongest when used as part of a broader financial strategy rather than as a primary investment vehicle.
Both offer lifetime protection, but in different policy structures. Whole life offers fixed premiums, guaranteed cash value growth, and a guaranteed death benefit. Universal life provides more flexibility, allowing adjustments to premiums and death benefits within policy limits. That flexibility comes with more responsibility to monitor funding and policy performance over time.
Many term life insurance policies include a conversion feature that allows you to convert to a permanent policy without a new medical exam, as long as conversion rules are met. Conversion deadlines, eligible permanent policy types, and age limits vary by insurer, so it’s important to review your specific policy for details.
Permanent life insurance may not be a good fit for those who need the maximum amount of coverage at the lowest cost, prefer short-term protection, or want minimal long-term policy involvement. It may also be less suitable for people with unstable income or those who prioritize investment flexibility outside of insurance.
Death benefits from permanent life insurance are generally paid income tax-free to beneficiaries. Tax treatment can vary in certain situations, such as ownership transfers or estate planning strategies, so individual circumstances should be reviewed with a qualified financial professional.
Author
Chief Underwriter
Expert review
Chief Compliance & Privacy Officer
Jan 23, 2026
%2F2025%2520Update%2FAdobeStock_396125169_ov85k4.jpg&w=828&q=75)
%2FStocksy_txpdf1a777167U200_Medium_1911062_horizontalEdited_znqhgh.jpg&w=828&q=75)
