FAQ: Is There a Limit on Permanent Insurance Payouts?

Permanent life insurance is a cash-value type of life insurance policy, and there is usually no limit on the amount companies pay out. “Cash value” means that permanent life insurance takes the money you put into it and sets it aside for you to have later. The money you accrue in your permanent life insurance policy will either earn interest at a rate determined by the insurance issuer, or it can be invested for you in the stock market or other vehicles. Many people like permanent life insurance for this very reason, because it means that they can use this money for when they retire, or for an emergency that requires a cash solution. Permanent life insurance policies aren’t just about their cash-value advantage. When you buy a permanent life insurance policy, you select a death benefit that you want paid to your loved ones should you die. This means that the payout of your permanent life insurance policy could be as high as the death benefit you selected, plus all the money you put into it (minus any that you spent).

Realistic Payouts

When it comes to selecting the total amount of the death benefit you want paid to your beneficiaries in the event of your death, many people try to gauge their needs based upon the value of their current assets as well as what kind of debt load they are carrying. You may decide that you want a policy that will leave your beneficiaries $1 million, for example, or $500,000. Regardless of the amount of the death benefit, with permanent life insurance the money you pay in premiums will also be a factor in the payout.

Limits Can Vary by Company

Different permanent life insurance companies have different rules and stipulations when it comes to their payouts, and different things can conceivably affect the total pay out. Before you commit to a life insurance policy, be sure to consult with an insurance expert so that you don’t make any costly mistakes.