Life insurance to safeguard your future

March 16th, 2009  |  Published in Investment

by Juanita Martinez
Life insurance is a financial tool that helps protecting the interests of the family members at the event of a premature death of the bread earner of the family. Hence, if you have financially dependant family members, you may consider buying a life insurance plan.
Life insurance plan works as a risk manager, helps you to plan ahead for your future. Some life plans, along with providing the policy holder with the death benefit, also help in accumulating fund value.
Life insurance, since its inception has trudged a long way. Now life policies are available at every possible form to cater the various needs of its consumers- term life plans, universal life plans, whole life plans and so forth.
Term life policy
Term life policy can be termed as the forerunner of the life insurance industry. The term life plan offers coverage for a certain period of time against the payment of premium. The traditional term life policy only pays out the death benefit if the policy holder dies within the term of the plan. The term life insurance can further be categorized as the following,
The level term policy: in the level term policy the coverage level and therefore the premium remains constant for the entire term of the plan. The decreasing term life insurance: the policy coverage decreases with time. This type of plan is ideal for people with mortgage loan. The coverage limit will decrease in accordance with the outstanding loan amount.
The whole life policy For a whole life plan the coverage continues for the lifetime of the policy holder, i.e. as long as the policy holder continues paying the premium the coverage will continue. The premium level, however, is subjected to stay the same for the traditional whole life plan. The whole life policy is priced higher than the term life plan because of its advantageous features.
How to determine the amount of coverage you need?
It’s important to determine the coverage level that you need before shopping for the life insurance. At the outset if you have a family dependent on your income, or have kids to care for, you need life insurance. However, that doesn’t imply that life insurance isn’t an option for a single individual. A life policy can help in creating substantial saving for the funeral expenses as well.
Here is a formula that might help you in determining the coverage level you need.
  • Multiply your income with the number of years you’re planning to work.
  • Add to it unexpected expenses, like- huge medical bills, to obtain the final figure.
  • Incorporate the inflation factor into your calculation.
  • Include the additional income that the family might lose at the event of your untimely death.
  • You must not miss adding the funeral expenses and the estate taxes while calculating the coverage need.
A figure thus obtained can give you a fair idea about the level of the coverage that may cover all the losses of your family, apart from the emotional loss, if you don’t live long enough to take care of them.
About the Author
Juanita Martinez is a longtime contributor and Moderator of the ampminsure community. She is a financial writer, specializing in the field of insurance. You can reach-out to her through the ampminsure community for insurance related queries.


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