Ally Permanent life insurance is a type of life insurance policy that provides lifetime coverage as long as premiums are paid. Unlike term life insurance, which only provides coverage for a set period of time, permanent life insurance policies stay in effect for the insured’s entire life.
The key difference between permanent life insurance and term life insurance is permanence. Term life insurance only covers the policyholder for a specific term, usually 10 to 30 years. It does not have a cash value or investment component. Permanent life insurance covers the insured for their entire life as long as premiums are paid and has an investment or cash value component that grows over time.
Permanent life insurance combines a death benefit with a cash value account funded by the policyholder’s premium payments. The cash value accrues on a tax-deferred basis and can be accessed by the policyholder through withdrawals or policy loans. Upon the insured’s death, the life insurance company pays out the death benefit to the policy’s beneficiaries.
Some common types of permanent life insurance include whole life, universal life, and variable life insurance. While term life insurance provides temporary protection, permanent life insurance provides lifelong coverage, cash value that grows over time, and becomes a financial asset for the policyholder.
How Does Permanent Life Insurance Work?
Permanent life insurance provides lifetime coverage as long as you continue paying the premiums. It’s different from term life insurance, which only covers you for a set period of time.
With permanent life insurance, part of your premiums go toward building up a cash value component. This is essentially a savings account that grows tax-deferred over time. The cash value earns interest based on market rates. It can be accessed via policy loans or withdrawals if needed.
The remainder of your premiums go toward paying for the death benefit, which is the amount your beneficiaries would receive if you pass away. As long as you keep making payments, the death benefit is guaranteed for life. The death benefit payout is generally income tax-free.
Permanent life insurance premiums are typically higher than term life insurance since you’re paying for lifelong coverage. Premiums remain level and don’t increase with age. The death benefit also remains level unless you choose to decrease it later on.
Types of Permanent Life Insurance
There are three main types of permanent life insurance:
Whole Life Insurance
Whole life insurance provides lifetime coverage as long as premiums are paid. It has a level premium that stays the same throughout the policy. Part of the premium goes towards the death benefit, while the rest builds up a cash value that accrues interest. Policyholders can borrow against or withdraw the cash value. Whole life insurance combines an insurance policy with an investment component.
Universal Life Insurance
Universal life insurance provides permanent coverage with premiums that can vary over time. Policyholders can pay whatever premium amount they want, as long as it covers the cost of insurance and other policy fees. Excess premium payments get credited to the cash value, which earns interest. Universal policies are very flexible, allowing adjustments to the premium, death benefit, and cash value.
Variable Life Insurance
Variable life insurance offers permanent coverage where part of the premiums can be invested in separate investment accounts, like stocks and bonds. The cash value and death benefit can fluctuate depending on investment performance. Policyholders can allocate premiums between the fixed account that accumulates interest and variable subaccounts. It carries more investment risk but also the potential for higher returns.
Benefits of Permanent Life Insurance
Permanent life insurance offers several key benefits that make it an attractive option for many policyholders:
Lifelong Coverage
One of the biggest advantages of permanent life insurance is that it provides lifelong coverage. This ensures your loved ones will receive financial support even if you live into your 80s, 90s, or beyond. Permanent policies provide a reliable way to lock in coverage you can keep for life.
Cash Value Accumulation
Permanent life insurance builds up cash value that you can access while still alive. A portion of each premium goes toward the policy’s death benefit, while the remaining portion builds cash value that grows on a tax-deferred basis. This cash value belongs to you and can be withdrawn or borrowed against, allowing you to tap into a pool of funds in case of emergency. The cash value continues growing over time and can be a nice supplement to retirement savings.
Fixed Premiums
Unlike term life insurance where premiums increase every renewal period, permanent life insurance locks in fixed premium payments for the life of the policy (with some caveats). This allows you to structure your budget around consistent, predictable premiums that won’t fluctuate. The premiums are typically higher than term insurance initially but remain level for the duration of the policy. This stability and predictability is appealing to many policyholders despite the higher upfront costs.
Drawbacks of Permanent Life Insurance
Permanent life insurance has some potential downsides to consider:
- Higher premiums than term life – Permanent life premiums are typically higher than term life because part of the premium goes toward building cash value in the policy. Term policies only cover the death benefit, so they tend to have lower monthly premiums.
- Less death benefit for the premium – Due to the cash value component, permanent policies generally don’t provide as high of a death benefit as term policies with the same premium amount. The tradeoff is you get the cash value savings.
- Fees and expenses – Permanent life policies can charge fees like administrative fees, cost of insurance fees, and more. These fees are taken from the cash value, reducing the policy’s returns. Term life does not have these fees.
So permanent life costs more upfront than term life. The higher premiums go toward building cash value that you can access during your lifetime. It’s a good fit for those wanting lifelong coverage plus tax-advantaged savings. But it comes at a higher overall cost than pure insurance protection.
Who Needs Permanent Life Insurance?
Permanent life insurance is well-suited for certain individuals who want lifelong coverage. Here are two key demographics that often benefit from permanent life insurance policies:
Young Families
Young families with children often take out permanent life insurance policies to make sure their family is financially protected no matter what happens. If the breadwinner were to pass away unexpectedly, the payout from a permanent life insurance policy ensures the surviving spouse and children are taken care of. Permanent policies provide continuous coverage, so even as the children grow up and leave home, the parents continue to have that financial safety net into old age. This gives young families invaluable peace of mind.
High Net Worth Individuals
Wealthy individuals use permanent life insurance for estate planning purposes. The tax-free death benefit can help offset estate taxes when passing on an inheritance to beneficiaries.
Permanent Life Insurance Riders
Permanent life insurance policies can be customized with optional riders for an additional premium cost. Here are some of the most common riders offered:
Accidental Death Rider
This rider provides an additional death benefit payout if the policyholder dies due to an accident. It can give extra financial protection to the beneficiary. The accidental death benefit amount is usually equal to the base death benefit, effectively doubling the payout.
Disability Rider
A disability rider allows the policyholder to stop paying premiums if they become totally disabled. The policy will continue without lapsing. Some disability riders also pay out a portion of the death benefit as monthly income while disabled. This helps cover costs during a difficult period.
Chronic Illness Rider
Also called a “living benefit” rider, this allows early access to part of the death benefit if diagnosed with a chronic illness. This money can be used to pay for medical treatment or long-term care. It provides a source of funds during a health crisis rather than waiting until death.
Ally Permanent Life Insurance Options
Ally offers several types of permanent life insurance policies to choose from:
Whole Life Insurance
Whole life insurance provides lifetime coverage as long as you continue paying the premiums. It has a level premium that does not increase with age. Whole life combines a death benefit with a cash value component that grows on a tax-deferred basis.
Ally’s whole life policy offers:
- Guaranteed death benefit
- Fixed premiums
- Cash value accumulation
- Dividends (not guaranteed)
- Loan provisions against cash value
Whole life is a good option if you want lifetime protection and tax-advantaged cash value growth. The premiums are typically higher than term life insurance.
Universal Life Insurance
Universal life insurance provides permanent coverage with flexible premium payments. Part of the premium goes toward the death benefit, while the rest builds cash value.
With an Ally universal life policy, you can:
- Adjust coverage as your needs change
- Skip or reduce premium payments (with limitations)
- Earn interest on cash value
- Borrow against cash value
Universal life is advantageous if you want permanent coverage but also flexibility in costs and the ability to access cash value.
Variable Life Insurance
Variable life insurance offers a death benefit along with investment options for the cash value portion. You can allocate the cash value among various investment subaccounts.
Key features of Ally’s variable life policies include:
- Premium flexibility
- Choice of investment options for cash value
- Tax-deferred growth potential in the investments
- Ability to change investments over time
- Loans available against the cash value
Variable life is a good fit if you want control over investing the policy’s cash value to pursue growth over time. There is a risk that investment returns may be negative.
Ally provides personalized guidance to help you select the right permanent life insurance product to suit your financial situation and goals. Their team can walk through the specifics of each policy in detail.
Getting a Quote for Ally Permanent Life
Getting a life insurance quote from Ally is straightforward and can be done entirely online. Here’s how to get started:
- Visit Ally’s life insurance website and click “Get a Quote”
- You’ll be asked to provide some basic personal information like name, date of birth, height/weight, and contact details. This allows Ally to provide an accurate quote.
- Next, choose the type of life insurance you want a quote for – term life, whole life, etc.
- Select your desired coverage amount and length. Ally allows you to customize your policy.
- Answer questions about your health, family history, lifestyle, etc. Insurers use this info to evaluate your eligibility and rates. Be as accurate as possible.
- Once submitted, Ally will generate your real-time quote in minutes. No waiting!
- You can refine your quote by adjusting details like policy length, coverage amount, riders, etc.
- If satisfied, you can continue on to formally apply and submit payment to get your Ally permanent life insurance policy locked in.
Getting a personalized quote only takes a few minutes on Ally’s website. You’ll just need to provide some key details about yourself and your coverage needs. This allows you to compare pricing and make an informed decision before purchasing.
Applying for Ally Permanent Life Insurance
The application process for Ally’s permanent life insurance policies is straightforward. Here’s an overview of what to expect:
Application Process
- Complete an application – This can be done online or by meeting with an Ally insurance agent. You’ll provide personal and health information.
- Authorize access to medical records – Ally will request access to your medical history as part of the underwriting process. This allows them to thoroughly evaluate your insurability.
- Schedule any required medical exams – Depending on your age and policy amount, you may need to get a medical exam. This exam will be scheduled at your convenience.
- Interview with an underwriter – The underwriter will contact you by phone to ask follow-up questions about your health and lifestyle. Be prepared to provide details.
Underwriting Process
The underwriting process is how the insurance company evaluates your level of risk to determine pricing and eligibility. Here’s how it works with Ally:
- Review health history – The underwriter will thoroughly review your medical records, exam results, and interview responses. They analyze all health conditions you currently have or have had in the past.
- This determines your premium amount.
- Make approval decision – Finally, the underwriter decides if you qualify for coverage and at what price. If approved, you’ll receive a policy reflecting your specific risk class.
The underwriting process aims to accurately evaluate and price the risk you present to the insurance company. Being truthful upfront makes this process go smoothly. Ally has an efficient underwriting team that can get you an approval decision quickly.