Whether you are married, have kids or are single, life insurance is always important to consider. When you die, it can be very hard on your family (in many ways) especially if you are the main source of income. With grieving a loss, the last thing you want them to worry about is how they will live without your income.
While it’s often not easy to talk about, life insurance is something you should understand before you purchase a policy. Here are some answers to basic questions about life insurance to help get you started:
What is life insurance?
While auto insurance can cover property damage and liability if you get in an accident, life insurance provides a cash benefit for your loved ones.
What types of life insurance are there?
There are two main types of life insurance, term and permanent.
Term life insurance covers a certain amount of time (10, 15, 20, 25 or 30 years). When you pass away, the beneficiary will be paid in one single payment. If you are still living when the term is over, you have the choice of renewing for another term or switching to permanent coverage.
Permanent life insurance is, well, permanent. As long as you pay your premiums, don’t over loan on the policy, or take other actions detrimental to the policy, permanent life insurance covers you for the rest of your life. Permanent life is generally more expensive than term life, however, with this coverage you can accumulate cash value that you can tap into whenever you need while still living.
What is cash value Life Insurance?
When you choose permanent life insurance, your insurance company will take some of your premium and put it into cash value. Why is this a good idea? Well, over the course of your policy, this value will grow, and it can be available for your use. However, while this is a nice perk to have, don’t abuse it. Remember that any money you decide to take out also comes out of your death benefit.
How are life insurance premiums determined?
Life insurance premiums are based on the level of risk the insurance company takes by insuring someone. For instance, barring any type of accidental death, it would cost more to insure an older person who has used tobacco for many years than someone who is young with no history of tobacco use.
Do life insurance policies have exclusions or exceptions?
Yes. Life insurance policies do include exclusions and exceptions, similar to an auto or homeowners insurance policy. Your agent can walk you through your specific policy’s terms. It’s important you understand them so you know what product you’re getting.
Life insurance is a way to help provide financial support for your family after you’re gone. The grieving process your family will experience will be difficult enough without having to worry if they can survive financially without you. It’s a big reason why life insurance is so important.
Something worth noting is with term life, you can convert to permanent life, but you cannot convert to term life from permanent. It’s a good idea to talk with your local Alfa® agent about which coverage better fits you.
Contact your local Alfa agent today.