Permanent Life Insurance

Permanent life insurance plans, not only insure you for lifetime against death event but your investment portion will grow over the time when you are alive.

Flexibility of these plans allows you to choose the level of investment and insurance coverage suites your personal need. It’s also possible that gradually minimizes insurance coverage so investment potential of your policy will be maximized.

How many types of permanent life insurance are in the marketplace?

Permanent life insurance consists of two parts:

  • Universal Life insurance (UL)
  • Whole life insurance

Universal Life (UL)

Universal life insurance which usually called “UL” is a life insurance policy; covers you for the entire life and keep the saving and insurance components completely separate that can offer you tax-sheltered guaranteed investment or variable investment choices.

Universal life insurance (UL) is the most flexible life insurance exists in marketplace. It’s possible to customize your plan at the time you take it and make any changes, later on.

You have choice to how your premium is invested and can withdraw cash from your policy investment or insurance borrow against it.

What is the Yearly renewable Term (YRT) life insurance?

You have option to vary the premium of the life insurance and coverage of the policy in the future years. This kind of permanent life insurance so called YRT (yearly renewable term) or ART (Annual renewable term).

What is the tax advantage of the investment part of universal life policy?


UL policy allows you to accumulate interest while tax is deferred, enabling you to take advantage of returns that may be much higher than those offered by other traditional saving plans.

You can take advantage of tax-deferred investing in UL according your risk-tolerance and also get bonus interest on your investment part.

If the policy keeps in force until death, the cash value will be tax-free because the premiums are paid with after-tax money. So deposited money is after tax paid and only growth would be taxable.

What are the options in Universal life?

Universal life insurance plans give you the choice to buy it as 10 pay or 20 pay.  It means premium payments may be made for 10years or 20 years, with intention that then after your

Policy is paid-up. Another option is choosing coverage plus fund which means after death your beneficiary will get the face amount plus investment portion.

What is the policy loan in universal life insurance?

Policy owner who has universal life insurance and deposited more fund in the investment portion, can use it as collateral (for tax advantage) and receive up to 80% of whole amount from insurance company as “policy loan”.

Whole life insurance

Whole life is a permanent life insurance policy with level premium which usually is higher than Universal life and Term insurance and a portion of that automatically goes to the investment account of the policy as “cash value”. This portion also called cash surrender value (CSV).


What is the cash value in Whole life?

In Whole life, part of premium automatically deposit to the investment account with accumulates interest to the cash value. At the time of maturity of the insurance contract (usually at age 100), the cash value would be equal to death benefit. This plan provides benefit to the policy owner and the insurance company.

What is the policy loan in whole life insurance?

Policy owner of whole life insurance can use the saving portion of it as collateral (for tax advantage) and receive up to 80% of that saving from insurance company as “policy loan”.

Is premium and cash value fix or variable in whole life?

Guarantied premium, death benefit and the cash value give a piece of mind to the policy owner and insured cause the cash value is accessible at any time. The insurance company also makes profit cause with every premium payment made, the net amount at risk, and the cost of insurance (COI), is reduced.

How many types of Whole life are in the market?

Depending on the plan you get from your adviser, whole life insurance spreads the cost of your coverage, over the lifetime of policy or over limited period of time.  So in terms of investment portion there are two kinds of whole life:

  1. Non Participating (Non Par or T100)
  2. Participating

Non-participating (T100) is permanent life insurance which insures the policy owner, lifetime and premiums are payable until age 100.

Is there any cash value in non-par whole life?

There is no cash value in non-par whole life and it does not pay dividends. Like a regular term life insurance (T100) premiums are set for the life of the policy, but because the policy covers the whole of your life, the premiums are higher than regular term insurance.

Participating allows you to have an investment component with no need investment expertise. Insurance companies’ offers a number of participating whole life plans, each focusing on different financial needs and goals.

What is the advantage of investment is par whole life?

Par whole life is the best life insurance for you with a tax-deferred investment without the need to manage that investment and balanced investment portfolio without the annual fluctuation caused by market value changes.

What is the paid up option in whole life?

Whole life insurance usually set to pay premiums for the life of the policy. There are some arrangements as paid up option that let the policy be “paid up”, which means that no further payments are ever required, in as few as 5 years, or with even a single large premium. Basically if the payer doesn’t make a large premium payment at the beginning of the contract, then he is not allowed to begin making them later in the contract.

Is cash value guaranteed in Whole life policy?

Insurance company generally will guarantee that the policy’s cash values increase, regardless of the performance of the insurance company or its experience with death claims. So one of the advantages of Par-whole life is; cash value is guaranteed according the schedule of the policy.

Is cash value in par-whole life accessible for policy owner?

Cash values are considered liquid to be used for investment capital, but only if the owner is financially healthy enough to pay the premium. Cash value access is tax free up to the point of total premiums paid, and the rest may be accessed tax free in the form of policy loans. If the insured dies, death benefit is reduced by the amount of any outstanding loan balance.

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