1: Who should take Life Insurance
A Life Insurance is a way to replace your or your spouse income in case of death.
It means if your current gross annual income is fifty thousand. Then your insurance should be able to provide the same income to your beneficiaries.
2.How much life insurance I need.
As mentioned earlier it should be enough to replace your current income.
For example if your current income is $50,000 then you should take insurance of about
$50000 x 10= 500000 .
Why to multiply by 10.
The logic is if your beneficiary invest $500,000 and they get at least 10% per annum on that.
Then they will have at least annual $50,000 income.
3.How many type of life Insurance are there.
There are 3 type of life insurance policies
1:Term Insurance 2: Whole life Insurance 3: Universal Life Insurance.
4:What is the Difference between these 3 Type of Insurance.
Term Life Insurance
One of the most common types of insurance offered by companies is term insurance, often called pure insurance.With this type of coverage a persons buys a policy for a specified monthly premium with the insurance available for a set time, or term, and usually only pays out upon the death of the insured and accumulates no cash value.
This is the Lowest cost Insurance,But it serves the purpose well,because due to lower cost,everybody afford it and is able to insured to the full insured amount needed.
Whole Life Insurance.
Apart from having the life insured part,in whole life there is also a investment part which gives this policy cash surrender value.
This is the most expensive insurance.
Universal Life Insurance
Like Whole policy it has cash surrender value.Also the cash value available with a universal insurance policy can also be used to make the premium payments on the policy.
5:What are some of the disadvantages of different type of insurance.
Personally I believe that the purpose of any insurance is to replace your income in case of your death.It should not mix with your financial goals.
If you want to have some income from your financial investment,then you should open a separate investment account.
Attaching investment portion to the insurance policy make it very expensive resulting in people under insuring themselves.
Secondly insurance companies usually pay very less on investment portion earning.So this is the disadvantage of having a whole Insurance.
So personally I recommend Term Insurance.
There are some disadvantages of term insurance also.
If you miss few premium payments your policy will be canceled and in order to reinstate it,you will have to go through medical exam. Now if you took the policy when you didn’t have any medical condition to now when you have some medical problems then may be you will be refused future coverage or if allowed it will be very expensive due to the present medical conditions and your increased age.
Taking a Life Insurance is a very important decision.You should consult a reputable financial Planner or a Insurance broker, before buying the policy.