I sometimes wonder, if I find it hard in choosing a proper life insurance policy that could serve my specific needs, then what a layman will do at the early stage of his carrier? We often procrastinate/neglect or realize lately, the practical utility of an insurance policy when we experience an event of severe mischance that happens to someone close to us.
The entire family may suffers financially.
Purchasing a life insurance is one the most important decision you ever make in your financial life.
Some questions may ask-1.
Why do we buy a life insurance? 2.
How much should we buy? and 3.
What sort of policy shall we to buy? Now, looking at the first question, we may eventually say that our nearest beneficiary would be our spouse and children (if we are married), our aged parents, our business related partners & employees.
Going to the second one,we would consider the different aspects just after the unexpected demise of the insured person such as probable short term expenses e.
g.
funeral expenses, uninsured medical expenses, taxes, debts, mortgage etc.
Current day to day expenses are food, housing, clothing, health-care, insurance, transportation & other misc.
And Future expenses are children's education, retirement, savings etc.
Many experts argue that we should have life insurance as per some rough calculation= Our annual income x 5 times or 20 times.
Whichever you choose, it'll serve the purpose.
Now, after the insured's death, his family may have other source of income such as earnings from spouse's job, savings, investments, insurance etc.
So, how much life insurance do we need? It is workout just deducting the sum total of our possible expenses from the probable future earnings of insured's dependent family.
You can do your financial need analysis or use life calculator on practical basis to arrive at probable life insurance coverages.
And what sort of life policy will serve you best will depend upon several factors such as how long you need the insurance, your budget etc.
Term or Pure policy suit someone while Permanent or Cash value policy meets long term need.
Now, which one will suit you most is needed an elaborate discussion.