The easiest way to picture permanent life insurance is in contrast to term life insurance. With term life insurance premiums increase over time and the insurance eventually expires – it’s no longer available. Permanent life insurance is life insurance where the premiums remain level over your entire life (this generalization isn’t entirely true as there are situations where permanent insurance premiums may increase or decrease.).
In order to keep premiums level over your entire lifetime when costs (i.e. death claims) increase as we get older, the insurance companies charge more for permanent insurance that term insurance initially. However over longer periods of time permanent insurance typically is less expensive than term (because term insurance premiums go up over time).
Permanent life insurance is suitable for insurance needs where you expect to keep the life insurance forever – as long as you live. Typical examples of this would be for creating an estate if you want to leave money behind for family, some tax and estate planning purposes, as well as funeral cost and final expense coverage.
Many Canadians equate permanent insurance with whole life insurance. In fact, we have three types of permanent insurance in Canada – whole life insurance, term to 100, and universal life insurance.
As permanent life insurance is intended to be purchased for extended periods of time – many decades in some cases – you should focus on guarantees, or perhaps more precisely what policy provisions are not guaranteed. Changes in company earnings and costs, stock market crashes, and other financial environment factors may not affect the policy today or even in 20 years. But if a feature in your policy is not guaranteed and the company takes advantage of that lack of guarantee 30 years in the future, you may find yourself with some very difficult decisions later in life.