Are you sure that you are adequately insured and the benefit your family will get will see them through the critical time in your absence? Think hard! You are young and healthy. Yet youth and good health have never been able to stop death from taking a life. Yes, you can die any moment and no amount of money can take your place, but it can make life easier for the living spouse and other dependents like minor children or even aged parents.
When we buy a life insurance policy, we willingly incur a small loss (paying the premiums) to prevent a larger and a more devastating loss (economic hardship due to the death of the policyholder, who is sometimes the sole breadwinner of the family). Following are the three important factors you need to decide when you buy a policy so that the balance between the two losses is kept in equilibrium:
• What type of life insurance do you want to buy, permanent life insurance or term life insurance? Term life is more affordable if you are young and healthy, whereas permanent life provides many other advantages along with the death settlement.
• If you are buying term life, make sure the coverage term is adequate. Reinsuring yourself at later stage may make the policy financially unviable.
• Determine the face value of the policy very carefully because this is the amount your family will be getting as death benefit. Moreover, the face value is one of the factors decides the amount of premium and hence the affordability of the plan.
Most people in the world have purchased affordable life insurance which is approximately two to three times their income. Although the people feel satisfied with the life insurance policies that they have; the reality is that they don’t have the sufficient life insurance cover. A very few percentage of the population have what is considered to be ‘sufficient’ by most life insurance experts. Generally, life insurance experts would recommend that your affordable life insurance must be at least 10 to 15 times your income. This is still a topic of high debate and may have variations.
Most life insurance experts consider the 10 to 15 times your income as a rule of thumb. You need to assess your finances properly to come to a proper figure that will secure the future of your loved ones. There are chances that 10 to 15 times your income can be just sufficient and there are chances that the 10 to 15 times your income may be very less. So, there is a need to get the accurate figure that you will need as a life insurance cover for your family.
How ever, you can call this just a rule of thumb. The lifestyle of your family at the time of your death will determine how much death benefit will actually be sufficient for them. Besides the national economy and inflation rate will also determine if the death benefit will turn out to be sufficient at that time. However, one has to make a start somewhere and the rule of thumb is good enough for it.
Suppose you have tax-free $50,000 from somewhere. Will you be able to give up your job and live on it for the rest of your life? Think hard before you answer. Think of all the possible expenditure and make list … include all and if the answer is still ‘yes’, let that be the face value of your policy and if the answer is ‘no’ increase the amount.
Of course, such methods are not full proof either. There are unexpected expenditures that the family will not be able to avoid. The inflation may make all calculations go haywire. It is wiser to keep a tab on the economic condition of the country and the purchasing power of the money all the time. You can always buy additional coverage if you think that is necessary. That is why keep receiving life insurance quotes from different carriers whenever you have time so that you can keep yourself abreast about the development of the insurance sector and do not miss a deal.
David Livingston has been involved in the insurance industry for a long time and is considered to be one of the leading expert in this industry. For more information on how to get affordable term life insurance or getting term life insurance rates, visit his site today.
Read More From David Livingston
|
