What is permanent life insurance? (2025)
Learn what permanent life insurance is, how it works, and the pros and cons. Compare whole, universal, and variable policies to find the right lifetime coverage for you.
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Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
UPDATED: Jul 1, 2025
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We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
UPDATED: Jul 1, 2025
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes should be easy. This doesn’t influence our content. Our opinions are our own.
On This Page
Permanent life insurance is a type of life insurance that provides coverage for your entire life—as long as you continue to pay the required premiums. Unlike term life insurance, which expires after a set number of years, permanent life insurance is designed to last a lifetime and includes a built-in savings component known as cash value.
This makes permanent life insurance both a protective tool for your loved ones and a long-term financial asset that grows over time.
How Permanent Life Insurance Works
When you purchase a permanent life insurance policy, you agree to pay premiums—either on a fixed or flexible schedule—throughout your life. In return, the insurer guarantees a death benefit payout to your beneficiaries whenever you pass away.
A portion of your premiums also goes into a cash value account, which grows tax-deferred. This cash value can be accessed while you’re still alive, offering a layer of financial flexibility that term life policies don’t provide.
As long as the policy stays in good standing and premiums are paid, your coverage remains active for life.
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Types of Permanent Life Insurance
Whole Life Insurance
- Fixed premiums and guaranteed death benefit
- Cash value grows at a fixed rate
- Ideal for those who want predictability and simplicity
Universal Life Insurance (UL)
- Offers flexible premiums and adjustable death benefits
- Interest credited to cash value is based on current rates set by the insurer
- Suitable for people who want more control over payments
Indexed Universal Life (IUL)
- Cash value growth tied to a stock market index (e.g., S&P 500)
- Includes downside protection (won’t lose value if the market drops)
- Good for moderate growth potential with limited risk
Variable Life Insurance
- Allows policyholders to invest in sub-accounts similar to mutual funds
- Cash value and death benefit fluctuate with investment performance
- Higher risk, higher reward—best for experienced investors
Key Features of Permanent Life Insurance
- Lifelong Coverage: The policy never expires as long as premiums are paid.
- Cash Value Accumulation: A portion of each premium builds savings that can be accessed while you’re alive.
- Policy Loans and Withdrawals: Borrow against your policy’s cash value without credit checks or tax penalties (if structured properly).
- Premium Flexibility: Depending on the type, you may be able to adjust how much and when you pay.
- Customizable Death Benefit: Some policies allow you to increase or decrease the payout amount based on your needs.
Pros and Cons of Permanent Life Insurance
Pros:
- Coverage lasts your entire life
- Builds tax-deferred savings
- Can supplement retirement income via loans or withdrawals
- May be used for estate planning or wealth transfer
Cons:
- Significantly more expensive than term life
- Can be complex to understand and manage
- Early cash value growth may be slow
- Fees and surrender charges can apply if canceled early
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Who Should Consider Permanent Life Insurance?
Permanent life insurance may be a good fit if you:
- Want to leave a guaranteed inheritance
- Have long-term financial dependents, such as a child with special needs
- Need life insurance as part of an estate or business succession plan
- Are looking for tax-deferred savings in addition to death benefit protection
- Can afford the higher premiums and want lifetime coverage
Permanent Life Insurance vs. Term Life Insurance
The main difference between permanent life insurance and term life insurance is how long the coverage lasts—and whether the policy includes a cash value component.
| Feature | Permanent Life Insurance | Term Life Insurance |
|---|---|---|
| Coverage Duration | Lifetime | Fixed term (10–30 years) |
| Cash Value | Yes | No |
| Premiums | Higher | Lower |
| Death Benefit | Guaranteed | Only if death occurs during term |
| Flexibility | High (depends on type) | Low |
| Tax Advantages | Yes (cash value grows tax-deferred) | No |
Term life is usually better for those who want affordable coverage for a specific period—such as while paying off a mortgage or raising children.
Permanent life, on the other hand, is ideal for those who want lifelong coverage, are planning their estate, or want to build savings alongside protection.
Final Thoughts: Should you buy permanent life insurance?
Permanent life insurance offers a unique blend of lifetime protection and financial growth potential. It’s not the right fit for everyone, but it can be a powerful tool if you need long-term coverage, want to build tax-deferred wealth, or have specific estate planning goals.
At Quote.com, we make it easy to compare permanent life insurance quotes and explore the policy types that work best for your needs. Start your search today to protect your future and build lasting financial security.
Frequently Asked Questions
Is permanent life insurance worth it?
It depends on your goals. Permanent life insurance is worth considering if you need lifelong coverage, want to build cash value, or are looking for estate planning solutions. However, it may not be the best choice if you just want affordable coverage for a specific period.
Can I convert term life insurance to permanent?
Yes, many term policies include a conversion option that allows you to switch to a permanent policy—often without a medical exam—within a set time frame. This can be a great way to secure lifetime coverage if your needs change.
What happens to the cash value when I die?
In most cases, the insurance company keeps the remaining cash value, and only the death benefit is paid to your beneficiaries. However, some policies offer riders that allow your beneficiaries to receive both, though they often come at a higher cost.
Do I pay taxes on the cash value?
No taxes are due on the cash value while it grows inside the policy. However:
- Withdrawals may be taxable if they exceed the premiums you’ve paid
- Loans are generally tax-free unless the policy lapses or is surrendered
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Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.