California Permanent Life Insurance

Life insurance is an agreement between you and the insurance company. You pay a certain amount of money each month (premiums) and if you die, the insurance company will give your loved ones a certain amount of money (death benefits) so they are financially secure. No one wants to think about dying but it will happen and the question is: will your loved ones have enough money to thrive when you're gone? There are two kinds of life insurance, Term Life Insurance and Permanent Life Insurance.

Difference between Term and Permanent Life Insurance

Term Life Insurance is purchased for a set number of years, typically, 10, 20 or 30 years. If you die within that time frame, your beneficiaries will receive the death benefits. But if you live beyond the time frame, then the policy will expire. At that point, you can choose to renew the insurance policy, buy a new insurance policy, or you may decide that you don't need life insurance anymore.

Permanent Life Insurance is forever - it does not expire. So, regardless of when you die, your beneficiaries will receive the death benefits. The premiums of Permanent Life Insurance is higher than those of Term Life Insurance. The reason is because the insurance company knows that you will die, so they will need to pay the benefits to the loved ones. To compensate for this, they need to charge a higher premium to have enough money to pay the beneficiaries.

When you pay into a permanent life insurance policy, the money is divided into two parts. One part is for insuring for your life: this part won't help you, but will help your beneficiaries when you die. The other part is used to build "cash value". The cash value portion is invested so you can earn interest. The cash value portion can be useful while you're still alive because in case of an emegency, you can:
- take out a loan against it,
- withdrawn from it, or
- use it to pay the monthy premium.