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Life Insurance

What Is Life Insurance?

It can be difficult to make sense of life insurance terminology. Here is a brief overview of the most common terms:
  • Term life insurance: A life insurance policy that provides a death benefit only. Your annual premiums are locked in for a set term, such as 10 or 20 years. In the event that you pass away during this period, a death benefit is paid to your beneficiaries.
  • Permanent life insurance: A long-term policy, such as universal life insurance or whole life insurance that includes an investment component and can cover retirement expenses in addition to providing a death benefit.
  • Universal life insurance: A permanent life insurance policy with a “liquid” account that accrues cash value, as well as interest, with each premium you pay. You can take out loans as needed for unexpected expenses or opportunities, such as a home purchase. You also can pay more than the scheduled premium, or take breaks from paying premiums.
  • Whole life insurance: A permanent policy with an investment component that provides for your financial needs similarly to universal life insurance, but without the liquidity of the funds. This life insurance policy accrues a cash value and pays out at the end of the policy, if it is kept current.
  • No exam life insurance: Life insurance coverage that some companies offer without requiring a medical exam first. Typically, this option will be more expensive because without submitting the results of a medical exam to the insurance company, you are an unknown and potentially greater risk.

Why Buy Life Insurance?

Life Insurance Birmingham AlabamaAs with all insurance, life insurance plans are about preparing for the unexpected. We don’t plan to have a heart attack or meet an untimely end. We may worry about the unforeseen, but there are few ways to prepare for it. Life insurance provides a way to be financially prepared and get peace of mind.
The main reason to buy life insurance is for financial protection for your family and dependents. If you are the sole income earner or the major provider in your family, then life insurance definitely makes sense. If you should die unexpectedly, your policy will help your family pay your final expenses and potentially receive ongoing support. The amount they receive will depend upon the size of policy you buy.

Life Insurance Statistics

  • 40% of American adults have no life insurance
  • Over 50% of U.S. households lack adequate life insurance coverage
  • About 40% of people surveyed say they would have immediate financial trouble if the primary wage earner in their household died

How Much Life Insurance Do You Need?

Choosing a life insurance plan requires a bit of math. You want to figure out how much your family needs for daily spending and major upcoming expenses in the event that you pass away too soon and cannot provide for them. Or, if you are young, single and healthy, you can look at the cost of paying off any debt you have accumulated, or the cost of care for an aging parent.

What is the Cost of Life Insurance?

The cost of life insurance varies considerably based on a number of factors, and can cost anywhere from $15 a month for a young non-smoking female to well over $1,000 a month for a middle-aged male smoker.

Life insurance companies use a rating system based on a number of risk factors such as a person’s age, use of tobacco, overall health status, occupation and a variety of other considerations.

A person who is relatively young, does not smoke and is healthy will likely get a much better rating than someone who has an underlying health condition or risky health habits. Health conditions, high-risk jobs and tobacco use can all make a policyholder risky for an insurance company to cover. A healthy person with a good rating is less of a risk to insure, so that person’s premiums will be lower than for a person who is considered a higher risk.

Here is an overview of some of the many factors that affect your life insurance costs:
  • The type of life insurance you want to buy: Term insurance costs less than permanent life insurance because it only pays a death benefit and does not build up cash value.
  • How much life insurance you want to buy: A $20,000 term policy will cost far less than a $1 million term insurance policy.
  • The age at which you buy your life insurance policy: The cost of life insurance climbs dramatically as you age.
  • Your health profile: If you have no health conditions, your costs will be lower than if you have heart disease, diabetes or other chronic conditions.
  • Whether you buy medically underwritten life insurance:  While it is possible to buy “no exam life insurance,” your costs will be much higher because the life insurance company is taking a higher risk to insure you than if you took a medical exam.

Finding the Right Life Insurance for You

Life insurance causes more confusion for people than perhaps any other type of insurance, partly because there are several different types of life insurance products, and partly because the best life insurance is unique to each individual. Should you buy term life or permanent life insurance? Do you need a broker or can you get life insurance from an agency? Should you buy life insurance coverage online or is that too risky?

While you can buy online life insurance, it may be difficult to know what you are getting and whether it will adequately meet your family’s needs. Buying life insurance is a very personal decision. You may want a policy that builds cash value over time, or you may simply want to purchase coverage that will provide a death benefit if you should pass away within a specific term.

These choices are individual, and for this reason it is smart to consult with a knowledgeable life insurance agent.

Call Hughes Insurance Services of Alabama today for your free no obligation life insurance quote.

Hughes Insurance Services Of Alabama

Contact Us:

Address:
400 Century Park South
Suite 106
Birmingham, Alabama 35226
Phone:
(205) 822-6778
Fax:
(205) 417-1444

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