What Is Permanent Life Insurance?

01.30.2026 | Category: Life Insurance

Underwritten by United of Omaha Life Insurance Company
Reviewed by: Andrew Berger, Mutual of Omaha VP and Actuary

Estimated Read Time: ~11 minutes

Summary: Permanent life insurance offers lifelong coverage, builds cash value, and serves as a versatile financial tool. This article explores the definition of this insurance policy, its types, and how you can leverage its benefits for financial protection and wealth-building.

When planning for the future, your long-term financial stability should be top of mind. One way to achieve this is by investing in life insurance. For many, the idea of life insurance begins and ends with term policies designed to cover them for a specific period. But what happens when your needs extend beyond a temporary solution? The perfect solution here is to invest in permanent life insurance.

In this article:

What is permanent life insurance, and how does it work?
The purpose of permanent life insurance
Permanent vs. term life insurance
Types of permanent life insurance
Choosing the right policy and next steps
Frequently asked questions (FAQs)

What is permanent life insurance, and how does it work?

Permanent life insurance provides coverage for your entire life. Unlike term policies, which end after a set number of years, permanent life insurance offers lifelong protection, and builds tax-deferred cash value.

The cash value component of permanent life insurance grows tax-deferred. This means policyholders don’t have to pay taxes on these values as they build within the policy.¹ That makes permanent life insurance a versatile financial tool for many purposes.

The purpose of permanent life insurance

Permanent life insurance serves a dual purpose. While its primary role is to help your loved ones feel financially protected when you pass, it also acts as a savings vehicle, offering the potential for wealth accumulation over time.

Permanent life insurance can create value not just for your beneficiaries but for you as well. The policy has a cash value component that grows over time. You can access this cash value while you’re still alive to help cover significant expenses such as your children’s college tuition, fund a dream vacation or make home improvements.

For individuals who have already maxed out their contributions to other investment accounts like 401(k)s, IRAs, or 529 plans, permanent life insurance can serve as an additional avenue for tax-deferred savings.

The combination of lifelong coverage and cash value growth makes permanent life insurance an integral part of your financial strategy.

However, the premiums for permanent life insurance are typically higher than those for term life insurance. This higher cost reflects the added benefits and the guaranteed lifetime coverage. If you have the financial means to sustain these premiums, permanent life insurance can be a robust solution to help secure your family’s future and also contribute to their financial growth during their lifetime.

Permanent vs. term life insurance

Many people consider getting life insurance so they can help protect their family’s financial future. But when choosing life insurance, the decision often comes down to term vs. permanent life insurance.

Term life insurance

Term life insurance provides coverage for a level premium for a specific period, such as 10, 20 or 30 years. If the policyholder passes away during this time, the death benefit is paid out to beneficiaries.

Term policies are generally more affordable during the term period, making them an attractive option for those seeking temporary coverage, such as young families or individuals with significant financial obligations like a mortgage. However, once the term ends, the policy may expire, and you receive no benefits if you outlive the policy.

Permanent life insurance

Conversely, permanent life insurance provides lifetime coverage, provided the premiums are paid. Along with a death benefit, this insurance has a tax-deferred cash value element over time.

While permanent life insurance may cost more than term life policies, it is suitable for people who want lifetime coverage and have the capacity to build wealth within the policy.¹

Features	Term life insurance	Permanent life insurance
Coverage duration	Limited to the term (10–30 years)	Lifetime coverage
Cost	Lower premiums initially	Higher premiums but builds cash value
Cash value	None	Builds tax-deferred cash value
Flexibility	Fixed death benefit and premium	Death benefit and premium may be adjustable (depending on type)
Policy Management	Pay premiums and track renewal dates.	Pay premiums and monitor cash value
Purpose	Temporary financial protection	Long-term financial strategy and family protection

Note that your budget, duration of coverage required, and financial objectives will all determine which policy is right for you. For some, starting with term insurance and then switching to permanent life insurance may be the best course of action, particularly if their financial situation changes over time.

Types of permanent life insurance

Here are the types of permanent life insurance to consider:

Whole life insurance: Guarantees lifelong coverage with fixed premiums, ensuring your payments stay unchanged throughout the policy. It includes a cash value component that grows tax-free, providing additional financial benefits.

Universal life insurance: Also known as adjustable insurance, universal life insurance allows changes to death benefits and premiums over time, offering flexibility to adjust coverage based on financial circumstances.

Variable life and variable universal life insurance: This type combines permanent coverage with investment options, allowing the cash value to be invested in sub-accounts. This provides potential for higher growth but also carries market risk.

Permanent life insurance: The key takeaways

Permanent life insurance provides lifelong coverage and financial prosperity for your family. When making a choice, it’s important to weigh the long-term benefits of permanent life insurance against the higher premiums. Ultimately, the decision to invest in a permanent policy should align with your overall financial strategy, considering your future needs, risk tolerance and the legacy you wish to leave behind.

Choosing the right policy and next steps

When considering permanent life insurance, start by evaluating your long-term goals and the level of flexibility you desire. Determine whether guaranteed growth, adjustable premiums or investment options are most important to you. This analysis will guide you in comparing policy features and understanding how each type manages cash value, premiums, and long-term protection.

To determine which permanent life insurance coverage might best fit your needs, use Mutual of Omaha’s Final Expense Estimate Calculator. This free tool can help you estimate the right amount of coverage for final expenses like funeral costs and outstanding debts.

Deciding if permanent life insurance is right for you?

Frequently asked questions (FAQs)

How is the cash value of a permanent life insurance policy calculated?

For Whole Life insurance, the cash value grows at a guaranteed rate as long as the premiums are paid.

For Universal Life insurance, the cash value is less predictable and depends on the premiums paid, the credited interest rate, and any policy charges such as cost of insurance.

What happens if I stop paying premiums on my permanent life insurance policy?

For Whole Life insurance, if you stop paying premiums, the policy could lapse after a grace period. However, many policies let you use your cash value to keep some coverage, such as converting to a smaller paid-up policy or temporary term coverage.

For Universal Life insurance, the policy is more flexible. If you stop paying premiums, the insurer will automatically deduct the cost of insurance and fees from the cash value to keep the policy active. The policy remains in force as long as there is sufficient cash value to cover these charges. If the cash value is depleted, the policy will lapse unless additional premiums are paid.

Are the death benefits from a permanent life insurance policy taxable?

Generally, the death benefits from a permanent life insurance policy are not subject to income tax. However, if the policy is part of a taxable estate, estate taxes may apply.

Reviewed by: Andrew Berger, Mutual of Omaha VP and Actuary

Andrew Berger brings extensive leadership experience in the life insurance industry, with a primary focus on product development and innovation. He earned his bachelor’s degree from Bentley University. He is a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries.

Sources:

Forbes, How To Borrow Money From Life Insurance Policy – Forbes Advisor, September 2025

Disclosures:

Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.

Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc. a Registered Broker/ Dealer. Member FINRA/SIPC. Investment advisor representatives offer advisory services through Mutual of Omaha Investor Services, Inc., a SEC Registered Investment Advisory Firm.

Life insurance and annuities are underwritten by United of Omaha Life Insurance Company, Mutual of Omaha Plaza, Omaha, NE 68175. United of Omaha is licensed nationwide except in New York and does not solicit business in New York. In New York, Companion Life Insurance Company, Melville, NY 11747 underwrites life insurance and annuities. Each company is responsible for its own financial and contractual obligations. Products and services may not be available in all states. Policy form ICC18L198P or state equivalent. In FL, D787LFL19P, In NY, 1002Y-0119.
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