Life Insurance Policies Explained
With so many life insurance coverages available, choosing the right policy can be challenging. Each individual has different needs, and not everyone requires the same type of coverage. Understanding life insurance can seem confusing, but breaking it down to the basics can help. Life insurance is essentially an agreement between you and an insurance company. Some policies provide coverage for a certain amount of time, like 10, 20, or 30 years, while others may provide lifelong coverage.
Life insurance is more than just a policy; it’s a promise to help those you love. Whether you’ve had life insurance for years and simply want to learn more or you’re exploring your options for the first time, this guide will help you understand the difference between coverages.
The importance of prioritizing life insurance
If you were to pass away unexpectedly, those who depend on you financially would not only face the emotional pain of losing you but also the financial burden of handling significant expenses without your help. Your family would have to cover costs related to your home, vehicle, debts, and funeral, which can quickly become expensive and overwhelming. Securing life insurance can protect the future of those who rely on your finances. Life insurance provides you with peace of mind that your loved ones will be able to pay off existing debts that you leave behind. It is your commitment to them that no matter what happens to you, they will be financially secure.
Term life insurance
Term life insurance policies provide death benefits if you pass away during a specified term. Most terms range from 10-30 years. If you outlive your term policy, you can renew it or upgrade to a permanent policy. Term policies are typically more reasonably priced than permanent policies and tend to be more straightforward. A term life policy may be right for you if you’re looking for simple and affordable coverage.
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Level Term
This option provides you with coverage for a selected amount of time ranging from 10-30 years. Up until the age of 65, you can upgrade your coverage to a permanent policy. Upgrading your plan may be subject to underwriting, which means your risk might need to be reassessed by your insurance provider. This option is a practical choice that can provide coverage for temporary debts like college tuition, credit cards, or mortgages.
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30-year return of premium
30-year return of premium policies provide coverage for up to 30 years. At the end of the 30 years, your base premium payments and policy fees are given back to you. Even if you cancel before the term ends, you still might receive a portion of your paid premiums back. This option is best for those under the age of 60 or those who think they might outlive their policy.
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Rapid issue
Rapid issue coverage is a simplified policy that provides quick and clear coverage. While most policies require medical exams, rapid issue does not, which speeds up the application process. This is a good option for ages 18-70 and has coverage lengths of 10, 20, or 30 years.
Permanent life insurance
Permanent life insurance plans are life-long options best for those who want to build cash value while getting a benefit at the end of their life. Generally, as long as you pay your premiums, permanent life insurance keeps providing coverage. Coverages that include terms like “universal,” “whole,” and “flexible” typically fall under permanent life insurance. Permanent coverage is typically more expensive than term life coverage due to its length and complexity. Permanent plans can be used as financial tools throughout your life. Depending on your policy type, there is potential for cash value growth.
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Whole life
Whole life coverage is custom to your needs and can provide consistent coverage throughout your whole life. It has a fixed premium and builds cash value overtime. This coverage offers customizable payment options and is best for any age up to 80.
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Interest sensitive
An interest sensitive policy is a popular option that earns interest with fixed guaranteed premiums, which means your premium amount won’t change. Interest sensitive plans have the potential to earn higher cash value than others. Some key advantages include competitive interest rates and premiums, cash accumulation, guaranteed death benefit, and tax deferred interest (the cash value it accumulates won’t be taxed while it grows).
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Flexible universal
Individuals like this plan because of its flexibility and cash growth potential. Flexible universal coverage can provide protection throughout your lifetime. It allows for you to change your death benefits, adjust your premiums within certain limits, and in some cases, temporarily suspend your payments.
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Guaranteed acceptance
With guaranteed acceptance coverage, you can avoid being turned away due to health reasons. This option doesn’t require a medical exam to be accepted. Guaranteed acceptance coverage provides coverage to help protect your family’s financial future. Guaranteed acceptance is typically available for ages 40-80. This type may be best for seniors, individuals with chronic health conditions, or high risk applicants who would be otherwise denied due to their health.
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Final expenses
Final expenses coverage is a quick-issue option best for age 15 up to 80. It has fixed premiums with limited cash value. No medical exam is required for acceptance. This type of coverage is a way to give your loved ones a payout at the end of your life to help with expenses like remaining medical or legal bills, funeral arrangements, and burial costs.
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First step
Designed for children, first step coverage is interest sensitive and provides affordable security up until 14 years old. Often known as “starter life insurance,” this protection is affordable and practical for young families. Flexible payment options are an advantage of this type of coverage. No medical exam is required for acceptance. This type of coverage can be converted for additional coverage that you can hand over to your children when they grow up. Securing the right kind of life insurance for your child can set them up for a financially secure future.
There are so many options. How do I know which coverage I need?
The type of life insurance coverage you choose depends on a few different factors, but most importantly, it’s based on your individual needs. Before selecting a policy, consider how much you’re willing to spend on premiums and how much coverage your dependents need. If you don’t have life insurance coverage yet, now is the best time to get it. Generally, the younger and healthier you are, the better rate you’ll get. Talk to your insurance agent or a financial advisor for guidance on which policy type would be best for you.
Although each life insurance option offers unique benefits, they all share a common goal: protecting your family from financial loss. Whether you’re looking for extensive life insurance coverage that builds cash value or simple coverage that you can pay over the course of 20 years, Alfa® has a policy for you. Contact your local Alfa agent today for a free life insurance quote.
*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.