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A person with two parachutes coming down from the sky.
Kiersten Essenpreis for Money

It’s been harder in recent years to find whole life and other permanent life insurance policies, which provide both a death benefit and an investment vehicle. Now a new tax provision promises to make them more widely available and more flexible, say experts.

“Permanent life insurance is an important safety net for families and small businesses,” says Paul Graham, senior vice president of policy development for the American Council of Life Insurers. Yet this financial lifeline was at risk of becoming a casualty of the economic distortions brought about by the pandemic -- notably persistently low interest rates -- and of regulations that hadn’t kept up with that rate reality.

Enter the Consolidated Appropriations Act, the COVID-19 relief and spending bill Congress passed at the end of 2020. In addition to its many stimulus measures, it contained an easily overlooked provision that affects whole life and universal life policies, collectively known as permanent life insurance.

Here’s an explanation of the rule change, why it’s a shot in the arm for permanent life insurance, and what this all means if you’re a prospective policy buyer.