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How does permanent life insurance work?

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Of all the contracts you'll sign in your life, few offer more reassurance than life insurance, which can help protect your loved ones financially when you pass away. Permanent life insurance is a popular type of this coverage. And it comes in three common forms: whole, universal and variable universal.

What is permanent life insurance and how does it work?

Permanent life insurance is designed to last your lifetime and pay out a death benefit, no matter how long you live, as long as you pay the premiums and the contract retains its value.

In addition to the death benefit, permanent contracts typically provide the opportunity to accumulate cash value as well. This balance grows on a tax-deferred basis, and you can access it for any purpose while you're alive by taking loans or withdrawals.1 It can be an important piece of your financial strategy. You could, for example, tap it to pay for the life insurance premiums, supplement your retirement income or fund major family expenses, such as paying for college. Although it's never guaranteed, some types of permanent protection even may pay dividends.

Permanent life insurance is something you can purchase even if you also have life insurance through your employer. The main reason to consider getting your own permanent policy is that the coverage will stay with you regardless of your job—you usually can't take workplace-provided insurance coverage with you if you leave.

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3 types of permanent life insurance

Whole life, universal life and variable universal life are the three main kinds of permanent coverage. The differences between them mostly pertain to premium payments and how cash value accumulates.

Whole life insurance

Consistent premiums & guaranteed cash value growth

Its features include:

  • A guaranteed fixed premium that never changes.
  • Lifelong coverage and a guaranteed death benefit, as long as premiums are paid.
  • Cash value growth that isn't subject to market risk.
  • The potential to receive dividends.

Universal life insurance

Adjustable premiums & cash value

Its features include:

  • Coverage that lasts your entire life, as long as premiums are paid.
  • The option to vary the timing and amount of premiums. Sufficient cash value must be available to cover your insurance costs.
  • The ability to increase or decrease the death benefit while the contract is active, which generally requires underwriting.
  • A death benefit that is not guaranteed. If you stop or reduce premiums and deplete the cash value, your contract could lapse or end.
  • Cash value that typically earns a fixed market rate of interest and changes over time. Insurers generally offer a minimum guaranteed interest rate that the contract will not go below.
  • Eligibility for dividends, although dividends are not expected to be paid.

Variable universal insurance

Self-directed investment component

Variable universal is very similar to universal. The main difference is that variable universal allows you to invest your cash value in investment subaccounts. That means the growth is tied to market performance and fluctuations. While this option gives you more control over your cash value, your success is more dependent on the market performing well. There's some risk that the contract could lose its value and terminate in a downturn.

Deciding what works best:
Whole life vs. universal life
If both whole and universal life insurance seem like a good fit, you can dig deeper into each type.

Explore the differences

Term vs. permanent life insurance

The key difference between term life and permanent life is the length of coverage. Term life insurance covers you for a set number of years—typically between 10 and 30—while permanent can last your lifetime. Term options also don't offer a cash value component.

Term life can seem like a budget-friendly choice because it's generally less expensive than permanent alternatives. However, permanent life insurance costs have a wide range. Based on your needs, you may find a permanent life option that's more affordable in the long run for the features you get.

Converting term to permanent

One consideration to weigh if you're leaning toward term over permanent is that some term contracts can convert to permanent coverage. This could allow you to extend your protection—potentially without having to undergo a new medical exam.

Blended or hybrid life insurance

One more option to think about is blended life insurance, which fuses certain features of permanent and term. These hybrid contracts provide benefits that are similar to term coverage at the beginning. Later on, the coverage transitions to resemble whole life insurance with a cash value that you can access in your lifetime.

Woman managing household finances in kitchen
Woman managing household finances in kitchen
Mature woman calculate household expenditures at home.

How much life insurance do you need?

What's the right amount of coverage for you and your family? Our free life insurance calculator can help you find out.

Go to calculator

Is permanent life insurance worth it?

Permanent coverage is worth considering if you want lasting protection and a savings component that could help you achieve financial goals while you're alive. With whole, universal and variable universal to choose from, you can decide which level of cash value and premium amount will most benefit you and your family.

A Thrivent financial advisor can help you sort through your options and find a contract that best fits your needs.

Investing involves risk, including the possible loss of principal. The prospectus and summary prospectuses of the variable universal life contract and underlying investment options contain information on investment objectives, risks, charges and expenses, which investors should read carefully and consider before investing. Available at

* Loans and surrenders will decrease the death proceeds and the value available to pay insurance costs, which may cause the contract to terminate without value. Surrenders may generate an income tax liability and charges may apply. A significant taxable event can occur if a contract terminates with outstanding debt. Contact your tax advisor for further details. Loaned values may accumulate at a lower rate than unloaned values.

This contract has exclusions, limitations and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.

Guarantees based on the financial strength and claims-paying ability of Thrivent. Permanent life insurance contracts have exclusions, limitations, and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer.