Permanent Life Insurance policies include insurance and savings in a single tax-advantaged plan.
With Permanent life insurance you have the ability to change your coverage, deposits and often your investment choices in response to your changing needs, conditions, or circumstances.
The two most common types of Permanent Life Insurance are:
Whole Life and Universal Life.
Whole Life is the type of insurance where the insurance protection and the savings component are bundled together and the savings component is managed by the insurance company. A hands off approach.
Universal Life on the other hand is an unbundled plan. Deposits are applied to the policy as they are paid each month or year. The insurance company deducts the insurance administrative costs from the deposits. The balance of the deposit is then applied to the saving account which is made up of a selection of investment options within the policy that you can manage.
With the savings component to a Permanent insurance plan, one can develop significant cash values which the owner of the policy may use through surrender, policy loans or leveraging. The excess deposits and cash value accumulates in the policy on a tax-deferred basis. Provided your policy value does not exceed an amount prescribed under the income tax act.
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