Determining The Amount Of Life Insurance That You Need
These factors discussed here below can be used to assist you on the type of life insurance cover that you might need.
Determine how much cover you need. Some people may not require the assistance of a financial adviser to calculate the cover amount needed. To enable good calculation and explanation factors such as money value, time and inflation will not be considered.
Consider any financial obligations which must be remitted should premature death, unfortunate incident or permanent or semi-permanent disability happen. Those that in the list of what should be paid off include mortgage loan repayments, business or personal debts among others.
Are there dependants who used to be financially supported? Among them are children, spouses or aged parents. If such persons are there then they should continue to be supported and hence a plan this should be arranged. A 20 year support for spouse, kids and aged parents the annual amount is $20,000 and this is an example only given if the insurer has met his untimely death or been permanently or partially disabled. The sum assured needs is about $400,000 in case the money is needed at this juncture.
If a person who has taken the insurance life cover meets with an unfortunate incident it is good to establish if there is any financial gift to be given. Sometimes there are people who would like to give some financial gift when they are deceased. Sometimes a contribution to a charitable organization. In case of any, all this should be calculated so as you can arrive at the correct insurance cover to purchase.
There are different opinions of this difficult question of income replacement. Whether the income growth rate has to be considered makes it an answer to a question that is not straight forward. However there is a thumb rule for this and that is it is important to know the number of years that your income is to be replaced. Replacing income for ten years means that the assured amount is $500,000 with a current salary of $50,000. Hence it will be possible to withdraw a total of $50,000 annually for ten years.
Determine the length of the insurance cover so that you can know the different life and best insurance covers that are available. Ability to pay insurance premiums should be the first consideration before even calculating the insured sum and the time the insurance policy will be covered.
This deliberation is a guide or a represention of the insurance market and the intention of this discussion is just for information. Seeking an insurance adviser is so that they can give insurance or financial advice.