Note: Any reference to the word guarantee is based on the claims paying ability of the underlying insurance

Permanent insurance provides lifelong protection and is known by a variety of names. These policies are designed
and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, it could
be the wrong type of insurance for you.

Most permanent policies including whole, ordinary, universal, adjustable and variable life have a feature known as
"cash value" or "cash surrender value." This feature, which is not found in most term insurance policies, provides
you with some options:

  • You can cancel or "surrender" the policy -- in total or in part -- and receive the cash surrender value as a
    lump sum of money. If you surrender your policy in the early years, there may be little or no cash value.

  • If you need to stop paying premiums, you can often use the cash surrender value to continue your current
    insurance protection for a specific period of time or to provide a lesser amount of protection to cover you for
    as long as you live if there is sufficient cash value.

  • Usually, you may borrow from the policy, using the cash value in your life insurance as collateral. Unlike loans
    from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately
    must repay any loan with interest or your beneficiaries will receive a reduced death benefit.

  • The interest crediting rate and therefore cash values of many life insurance policies may be affected by your
    carrier's future experience, including mortality rates, expenses and investment earnings.

  • Keep in mind that with all types of permanent policies, the cash value of a policy is different from the policy
    face amount. Cash surrender value is the amount of available cash when you surrender a policy before its
    maturity or your death. The face amount is the money that will be paid at death or at policy maturity.

What are the Types of Permanent Insurance?
There are many different types of permanent insurance. The major ones are described below:

Whole Life or Ordinary Life
  • This use to be the most common type of permanent insurance. It is sold by Mutual Life Insurance Companies.
    It is Life insurance that is kept in force for a person's whole life as long as the scheduled premiums are
    maintained. All Whole Life policies build up cash values. Most Whole Life policies are guaranteed* as long as
    the scheduled premiums are maintained. The variable in a whole life policy is the dividend which could vary
    depending on how well the investments and other business criteria of the insurance company is doing. If the
    company is doing well and the policies are not experiencing a higher mortality than projected, values are paid
    back to the policyholder in the form of dividends. Policyholders can use the cash from dividends in many
    ways. The three main uses are: It can be used to lower premiums, it can be used to purchase more insurance
    or it can be used to pay for term insurance.

Universal Life or Adjustable Life
  • This variation of permanent insurance allows you, after your initial payment, to pay premiums at any time, in
    virtually any amount, subject to certain minimums and maximums. You also can reduce or increase the
    amount of the death benefit more easily than under a traditional whole life policy. (To increase your death
    benefit, you usually will be required to furnish the insurance company with satisfactory evidence of your
    continued good health.)(Decreasing does not lower premiums.)

Variable Life
  • This type of permanent policy provides death benefits and cash values that vary with the performance of an
    underlying portfolio of investments held in a separate account. You can choose to allocate your premiums
    among a variety of investments which offer varying degrees of risk and reward. You will receive a prospectus
    in conjunction with the sale of a variable product.

  • The cash value of a variable life policy is not guaranteed*, and the policyholder bears that risk. However, by
    choosing among the available fund options, the policyholder can create an asset allocation that meets his or
    her objectives and risk tolerance. Good investment performance will lead to higher cash values and death
    benefits. On the other hand, poor investment performance will lead to reduced cash values and death

  • Some policies guarantee* that death benefits cannot fall below a minimum level. There are both universal life
    and whole life versions of variable life.

Advantages and Disadvantages of Permanent Insurance
  • As long as the necessary premiums are paid, protection is guaranteed* for your entire life or to a specific age
    / maturity.

  • Premium costs can be fixed or flexible to meet personal financial needs.(Loans, withdrawals and other
    transactions may affect the premiums required)

  • Policy accumulates a cash value that grows on a tax-deferred basis that you can borrow against. (Loans must
    be paid back with interest or your beneficiaries will receive a reduced death benefit.) You can borrow against
    the policy's cash surrender value to pay premiums or use the cash surrender value to provide paid-up

  • The policy's cash surrender value can be surrendered -- in total or in part -- for cash or converted into an
    annuity. (An annuity is an insurance product that provides an income for a person's life-time or for a specific
    period of time.) A provision or "rider" only can be added to a policy that gives you the option to purchase
    additional insurance without taking a medical exam or having to furnish evidence of insurability.

  • Required premium levels may make it hard to buy enough protection.

  • It may be more costly than term insurance if you don't keep it long enough.

Permanent Policy - Points to Consider
  • Are the premiums within my budget? Be sure you want to spend the money for this type of long-term coverage.

  • Can I commit to these premiums over the long term?

  • If you don't plan to keep the product for many years, consider another type of policy.

  • Cashing in a permanent policy after only a couple of years can be a costly way to get insurance protection for
    a short term.

What does the policy illustration show?
An illustration shows policy premiums, death benefits, cash values and information about other items that can affect
your cost of obtaining insurance. Your policy may provide for dividends to be paid to you as either cash or paid-up
insurance. Or it could provide for interest credits that could increase your cash value and death benefit or reduce
your premium. These items are not guaranteed*. Your costs or benefits could be higher or lower than those
illustrated, because they depend on the future financial results of the insurance company. With variable life, your
values will depend on the results of the underlying portfolio of investments.

Some figures are guaranteed* and some are not. Remember that the insurance company will honor the guaranteed*
figures, subject to its financial strength.

If your policy is a variable life policy, be sure that the interest rate or rate of return assumed is reasonable for the
underlying investment accounts to which you choose to allocate your premiums. It is important to keep in mind that
an illustration is not a legal document. Legal obligations are spelled out in the policy itself.

Here are additional questions to ask about the policy illustration:
  • Is the illustration up to date? Is it based on current experience?

  • Is the classification shown in the illustration appropriate for me (i.e., smoker/non-smoker, male/female)?

  • When are premiums due annually, monthly or otherwise? Which figures are guaranteed* and which are not?

  • Will I be notified if the non-guaranteed* amounts change?

  • Does the policy have a guaranteed* death benefit, or could the death benefit change depending on interest
    rates or other factors?

  • Does the policy pay dividends or provide for interest credits? Are those figures incorporated into the

  • Will my premiums always be the same? Is it possible that the premium will increase significantly if future
    interest rates are lower than the illustration assumes?

  • If the illustration shows that, after a certain period of time, I will not have to make premium payments, is there
    a chance I could have to begin making payments again in the future?

  • Is the premium level illustrated sufficient to guarantee* protection for my entire life?

Purchasing Tips
Here are a few tips to keep in mind when purchasing a life insurance policy:
  • Take your time. On the other hand, don't put off an important decision that would protect your family. Make
    sure you fully understand any policy you are considering and that you are comfortable with the company and

  • After you have purchased an insurance policy, keep in mind that you may have a "free-look" period usually 10
    days after you receive the policy during which you can change your mind. During that period, read your policy
    carefully. If you decide not to keep the policy, the company will cancel the policy and give you an appropriate
    refund. Review the copy of your application contained in your policy. Promptly notify us or the company of any
    errors or missing information.

  • Review your policy periodically or when your situation changes to be sure your coverage is adequate.

  • Here are some additional items to consider when you are selecting a term or permanent policy:

  • What happens if I fail to make the required payments?                                                                                       
    If you miss a premium payment, you typically have a 30- or 31-day grace period during which you can pay the
    premium with no interest charged. After that, the company can, with your authorization, draw from a
    permanent policy's cash surrender value to keep that policy in force as long as there is sufficient cash
    surrender value. In some flexible premium policies, premiums may be reduced or skipped as long as sufficient
    cash surrender values remain in the policy. However, this will result in lower cash surrender values.

  • What if I become disabled? ** Availability and specifics of these riders vary by carrier and state. Provisions or
    riders that provide additional benefits can be added to a policy. One such rider is a waiver of premium for
    disability. With this rider, if you become totally disabled for a specified period of time, you do not have to pay
    premiums for the duration of the disability.

  • Are other riders available? ** Availability and specifics of these riders vary by carrier and state. Another rider,
    called an "accidental death benefit", provides for an additional benefit in case of death by accidental means.

  • A relatively new rider offered by some companies provides "accelerated benefits," also known as "living
    benefits." This rider allows you, under certain circumstances, to receive the proceeds of your life insurance
    policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care
    or confinement to a nursing home. * Availability and specifics of these riders vary by carrier and state.

  • When will the policy be in effect?                                                                                                                        
    If you decide to purchase the policy, find out when the insurance becomes effective. This could be different
    from the date the company issues the policy.

*Guarantees are based on the claims paying ability of the issuing insurance company.

** Availability and specifics of these riders vary by carrier and state.
Snowcap Mountains
Permanent Life Insurance
RJ Insurance & Travel Services