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Permanent Insurance
Permanent insurance provides lifelong protection. As long as you pay the premiums, the policy will remain in force, and the death benefit will be paid. 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, this may be the wrong type of insurance for you.

Permanent policies are known by a variety of names: whole, ordinary, universal, adjustable, and variable life. Their cash value or cash surrender value, which is not found in term insurance policies, provides you with some options.

You can cancel or "surrender" the policy - in total or in part - and receive the cash value as a lump sum. If you surrender you policy in the early years, there may be little or no cash value.
If you need to stop paying premiums, you can use the cash value toward premiums to continue your current insurance protection for a specified time, or to provide a lesser amount of protection covering you for your lifetime.
You usually can borrow from the insurance company, 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; otherwise, your policy may lapse, or your beneficiaries will receive a reduced death benefit.

With all types of permanent policies, the cash value of a policy is different from the policy's face amount. The face amount is the money that will be paid at death. Cash value is the amount available if you surrender a policy before your death.

Term Insurance
Term insurance provides protection for a specific period of time, from one to thirty years. It pays a benefit only if you die during the term. Depending on the policy, the premium may remain constant during the term or increase each year. Some term insurance policies can be renewed when you reach the end of the term, but the premium rates will generally increase. Many policies require that you present evidence of insurability at renewal to qualify for the lowest rates.

Universal Life Insurance
This type of 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 death benefit more easily than under a traditional whole life policy. (To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health).

Whole Life Insurance
This is the most common type of permanent insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy. The cash value grows based on a fixed interest rate set in the policy.

Source: American Council of Life Insurers (ACLI) "What You Should Know About Buying Life Insurance"

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