What is permanent insurance?
Permanent life insurance covers you for life as long as the policy is in force: the death benefit is paid no matter at what age it happens. Most of these policies also build cash value over time, and you can borrow against that value.
Types and features
- Whole life: a level premium that doesn’t rise with age and a cash value with a contractual minimum. In its participating version it may receive dividends, which can vary. Limited-pay options exist, for example 10 or 20 years of premiums.
- Universal life: combines insurance with an investment account. It offers premium flexibility, but the cash value depends on returns and the premium might have to rise if they fall.
- Term to 100 (T100): a level premium for life and, generally, no cash value. It’s the simplest form of permanent protection.
Benefits
- Lifelong protection: the benefit is there whenever it’s needed.
- Level premiums with whole life and T100: you know what you’ll pay.
- Cash value that grows tax-deferred within the limits of an exempt policy.
- You can borrow against the cash value or use the policy as collateral.
- It helps with estate planning: paying taxes at death, leaving an inheritance or balancing what each child receives.
- In a business, it works with the CDA, Infinite Banking and insurance between partners.
How it differs from term insurance
| Feature | Term | Permanent |
|---|---|---|
| Duration | A set period (10, 20, 30 years or to a certain age) | For life |
| Cost at the start | Low | Higher, for the same amount of coverage |
| Premium | Fixed for the term; rises at renewal | Level (whole life, T100) or flexible (universal life) |
| Cash value | No | Usually yes (except T100) |
| Policy loans | No | Yes, against the cash value |
| Best for | Needs with an end date | Lifelong needs and legacy |
Read also what term insurance is and when it makes sense.
Use cases
- Leaving an inheritance to your children or grandchildren, whenever death occurs.
- Covering taxes at death, for example on capital gains from a property or investments.
- Children with a disability who will need support throughout their lives.
- Business owners who want to protect the company, plan succession and pay money to the family through the CDA.
- Donations to a cause or organization you care about.
Limitations
- The premium is several times higher than term insurance for the same amount of coverage.
- It requires a long-term commitment: cancelling in the early years can leave little or no value.
- Variable dividends and returns may be lower than projected.
- Some products, such as universal life, are complex and need monitoring.
- Unpaid loans reduce the death benefit and the cash value.
- It doesn’t replace your emergency fund or registered accounts such as the TFSA or RRSP.
Many families combine both: term for needs with an end date and permanent for lifelong ones. The key question is: does this need have an end date?