Life insurance protects your family
If you pass away, your family will be covered financially with a payout from the insurance company.
Term life is simple and cost-effective
As opposed to more complex insurance policies, term life insurance is easy to understand and can cost as little as $30 per month.
The Basics
A life insurance policy is essentially an agreement between you and an insurer. Your insurer agrees to pay a sum of money to your family in the event of your untimely death so long as you continue to pay your monthly premium each month. The amount the insurer will payout, how long your policy will last and your monthly premium are all decided up front and do not change as long as the policy is in effect.
Important Points
- Term life insurance is an insurance policy that financially protects your family in case of your untimely death.
- The policy is in effect for a length of time, known as “the term,” that you decide upon when you initiate the policy and typically ranges between 5 and 30 years.
- To keep the policy active, you need to pay a premium each month. The premium will not change for the duration of the policy.
- If you pass away during the policy’s term and you have been paying your premiums on time, your family will receive a cash payout equal to the value of the policy.
If you pass away, your family will lose a source of income and may be liable for debts, such as a mortgage or student loans. Although savings and investments may help pay towards these expenses, they are often not enough. Term life insurance can help fill the gap between how much you have saved and what your family would need in case of your death.
What to consider when taking out a policy?
When taking out a term life policy, you will have to decide the policy value and the policy term:
- Policy value: This is the amount your family will receive if you pass away. It should cover your outstanding debts (such as mortgage and student loans) as well as at least several years worth of expenses (such as rent, living expenses, and college tuition for dependents).
- Policy term: This is how long the policy will last. Typically, you may want this period to be long enough for your children to graduate from school and become independent, or for your spouse to reach retirement.
How is monthly cost determined?
Five main factors typically determine your monthly premium amount: the policy value, the length of the term, your age, your medical status, and whether you smoke.
- Some term life plans require you to undergo a medical examination, and the premium may be higher if you have a chronic medical condition (such as diabetes or hypertension).
- Once the policy is taken out, the premium will not change for the length of the term, even if you are diagnosed with a chronic condition later on.
Anything else I should know?
There are certain situations in which your family may not receive a payout; for example, if you commit suicide. Check with your insurer about the details of the policy you are considering.
Note: While Albert recognizes that there are many variations of life insurance, we have decided to focus on term-life insurance for its lower barrier to entry, typically lower premiums, and simpler process than other insurance policies. If you have any questions about a policy, Albert recommends speaking with the insurer to ensure the policy meets your and your family's needs.
Disclosures:
Albert Insurance Services, LLC provides insurance services on Albert's app. Click here for terms.
