Types of permanent life insurance

Key takeaways

• Permanent life insurance provides coverage that can last for a lifetime, as long as premiums are paid.
• Different types of permanent life insurance policies offer varying features and structures.
• Some policies may include a cash value component that can grow over time.
• Policy options may differ in how premiums, benefits, and cash value are structured.
• Understanding the differences between policy types can help when evaluating coverage options.

While Permanent Life Insurance policies are typically more expensive than their “Term Policy” counterparts, they often offer extra advantages, such as a guaranteed minimum death benefit and the ability to accumulate in cash value tax deferred. Here is a brief explanation of some different types of Permanent life insurance.

Whole Life

With Whole Life your premium payments are fixed for the life of your policy. Whole Life offers a guaranteed death benefit, and guaranteed cash value growth, with some additional non-guaranteed cash value growth potential. As long as you pay premiums, your beneficiary will receive the benefit amount upon your death.

Who is this for?

This type of policy may be considered by individuals who are looking for lifetime coverage with predictable premiums and guaranteed elements. It may also appeal to those interested in a policy that includes a cash value component as part of their overall financial planning.

Key features of whole life insurance

Here’s a quick overview:

• Fixed premium payments for the life of the policy
• Guaranteed death benefit
• Guaranteed cash value growth, with potential for additional non-guaranteed growth
• Coverage that remains in place as long as premiums are paid

Universal Life

Universal Life provides the flexibility of varying the amount of your premium payments and a guaranteed minimum death benefit — as long as your paid premiums can cover it. If you don’t keep up with the minimum payments, your death benefit payment can be reduced or the policy could lapse. This type typically offers lower premiums and more flexibility than Whole Life, but weaker guarantees and cash value growth potential.

Who is this for?

This type of policy may be considered by individuals who are looking for flexibility in how premiums are paid, along with a lifetime coverage option. It may also appeal to those who are comfortable managing their policy to maintain coverage over time.

Key features of universal life insurance

Here’s a quick overview:

• Flexible premium payment structure
• Guaranteed minimum death benefit, subject to premium payments
• Potential for lower premiums compared to whole life
• Coverage that depends on maintaining required funding levels

Indexed Universal Life

Similar to Universal Life, Indexed Universal Life provides the flexibility of varying the amount of your premium payments and a guaranteed minimum death benefit — with more upside potential. That is because interest credited to the policy is linked to an external index (such as the S&P 500). This interest credited is typically subject to an upside “cap” and downside “floor”. Because of the higher upside potential, premiums may be lower than Universal Life, but come with additional downside risk. 

Who is this for?

This type of policy may be considered by individuals who are interested in a flexible premium structure along with the potential for cash value growth linked to market index performance. It may also appeal to those who are comfortable with variability in how interest is credited over time.

Key features of indexed universal life insurance

Here’s a quick overview:

• Flexible premium payment structure
• Interest credited based on the performance of an external index
• Upside cap and downside floor on credited interest
• Guaranteed minimum death benefit, subject to premium payments

Variable Universal Life

A category of Universal Life, Variable Universal Life, also offers the flexibility of making variable premiums (provided you make the minimum to keep the policy inforce), and a choice of investment subaccounts for potentially greater cash value. This type offers the greatest upside potential, but also the most downside potential, as cash value is based on the performance of the investment subaccounts.

Who is this for?

This type of policy may be considered by individuals who are interested in flexible premiums and are comfortable with how investment performance may impact the policy’s cash value over time. It may also appeal to those who want more control over how the policy’s cash value is allocated.

Key features of variable universal life insurance

Here’s a quick overview:

• Flexible premium payment structure, subject to minimum requirements
• Access to investment subaccounts for cash value allocation
• Cash value linked to the performance of selected investments
• Potential for greater variability in outcomes based on market performance

How to choose the right permanent life insurance policy

1.  Understand your coverage goals
   Start by identifying what you want your policy to support, such as lifelong protection, estate planning, or cash value accumulation.
   
   
2. Compare policy features
   Review how different permanent life insurance policies handle premiums, cash value growth, and flexibility over time.
   
   
3. Consider how much flexibility you want 
   Some policies offer more predictable features, while others provide greater flexibility or variability based on funding levels or market performance.
   
   
4.  Decide how actively you want to manage your policy
   Certain policy types may require more ongoing attention, especially those connected to investment performance or adjustable funding.
   
   
5. Review your financial situation and long-term goals
   Evaluating your current finances and future priorities can help determine which type of permanent life insurance may align best with your needs.
   
   
6. Compare options before making a decision
   Taking time to review and compare different policy types can help support a more informed long-term decision.

 Conclusion

Permanent life insurance offers a range of options, each with different features and levels of flexibility. Understanding how these policies work, along with key differences in premiums, cash value growth, and risk, can help you evaluate your choices. Reviewing your needs and comparing policy types can support a more informed approach when considering long-term coverage.

Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer.
 

Loans and withdrawals will reduce the death benefit and the cash surrender value and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax.  Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made.  A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2.  Cash value available for loans and withdrawals may be more or less than originally invested. Withdrawals are available after the first policy year.
 

Insurance policies and/or associated riders and features may not be available in all states.
 

Variable universal life insurance has annual fees and expenses associated with it in addition to life insurance related charges (which differ with the product chosen), including surrender charges and investment management fees. Variable universal life insurance products are long-term contracts and are sold by prospectus.  They are subject to market risk due to the underlying sub-accounts and are unsuitable as a short term savings vehicle. The primary purpose of variable universal life insurance is to provide lifetime protection against economic loss due to the death of the insured person.  Cash values are not guaranteed if the client is invested in the investment accounts.  There are risks associated with each investment option, and the policy may lose value.
 

Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595 and securities are offered through John Hancock Distributors LLC through other broker/dealers that have a selling agreement with John Hancock Distributors LLC, 197 Clarendon Street, Boston, MA 02116.
 

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