Considering Life Insurance? Here’s What You Need to Know
Looking into life insurance but not sure where to start? It might seem complicated, but it’s simply a way to protect your loved ones financially if something were to happen to you. Whether you’re just starting to explore your options or ready to choose a policy, life insurance is worth considering at any stage of life.
What is Life Insurance?
Life insurance provides your loved ones with a cash benefit in the event of your passing. The payout from a life insurance policy can help cover things like debts, mortgages, daily expenses, funeral costs, and lost income, helping secure your beneficiaries’ financial future. There are two main types of life insurance: term and permanent.
Types of Life Insurance
Term Life Insurance
Term life insurance provides coverage for a set period of time, usually 10, 15, 20, 25, or 30 years. Term life is an affordable option with straightforward coverage that can help families plan for the future. If you’re still living when the term comes to an end, you can usually renew it for another term or convert to permanent coverage.
Permanent Life Insurance
Permanent life insurance provides coverage for your entire lifetime. Generally, 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 insurance often comes with higher rates due to its lifelong coverage and additional features like flexible premium payments and the ability to earn dividends.
Factors to consider before choosing a policy
Everyone purchases life insurance for different reasons, but the goal is the same: to protect your family’s future. When choosing a policy, think about any debts that would need to be settled after you pass away, such as a car loan, mortgage, student loans, or credit card balances. Additionally, think about the lifestyle you want your family to have when you’re gone and how much financial help they’d need to maintain it. It’s important to consider factors like your health, age, current financial situation, and how long you’ll need coverage. Your health and age play a big part in determining your eligibility, so the sooner you get life insurance, the better.
How much coverage do you really need?
A simple way to estimate how much life insurance you need is to multiply your annual income by 10-15. For example, if your annual income is $40,000, it would be safe to secure at least $400,000 in life insurance coverage.
This rule of thumb gives you a rough idea of the coverage your beneficiaries might need to replace your income, pay off debts, and cover final expenses. The more people who rely on your income, the more coverage you’ll need. Your insurance agent can walk you through coverage amounts and help you find a plan that fits your budget.
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How are Life Insurance premiums determined?
Life insurance premiums are based on the level of risk an insurance company takes on by insuring someone. Several factors that impact life insurance rates are an individual’s age, health, occupation, tobacco use, gender, policy type, and coverage amount. For instance, it would cost an insurance provider more to insure an older individual who regularly uses tobacco than a young, healthy individual with no history of tobacco use. This is because the tobacco user is more likely to develop health conditions in the future, which increases their risk.
Misunderstandings about Life Insurance
Despite the myths you’ve heard, life insurance can be valuable for all stages of life. Maybe you’ve heard things like, “life insurance is too expensive,” or “my employer’s coverage is enough.” In reality, insurance is more affordable than you might think, and your employer’s coverage probably wouldn’t be enough to cover your debts and provide for your beneficiaries.
Another common misconception about life insurance is that it’s only for older individuals, assuming that young, healthy people don’t need it. However, securing life insurance at a young age usually means you’ll get a cheaper rate. It’s not a scenario anyone wants to imagine, but just because you might be healthy right now doesn’t guarantee you’ll always be there to provide for your family.
Life insurance can be the key to ensuring your family is protected, no matter what the future holds. In fact, 44% of Americans admit to being only somewhat or not knowledgeable at all about life insurance, highlighting the importance of understanding your options.
Why choose Alfa Insurance for your Life Insurance needs?
Alfa® offers a variety of life insurance plans designed to meet your unique needs. When you secure life insurance with Alfa, you can benefit from affordable premiums, flexible payment options, and policies that build cash value over time. With trusted agents in Alabama, Georgia, and Mississippi, you’ll receive personalized service and expert guidance to help you choose the right coverage.
Contact your local Alfa agent today to learn more about your life insurance options.
All coverages are subject to deductibles and policy limits. This is not an insurance policy. It is intended only to provide a general description of Alfa Insurance® and/or its product lines and services. An actual policy contains the specific details of the deductibles, coverages, conditions and exclusions. Your Alfa® agent can explain the policy and benefits and answer any questions you may have before you buy.