The Ideal Amount of Life Insurance Policy

Scouting for a life insurance policy? You must be sure of your need for taking life insurance before you can decide about how much and where to take a policy from. Life insurance is a must for anyone with dependents and fixed obligations. Financial investment planning can protect you from future financial difficulties and also secure your family in the event of any untoward incident. But the task of arriving at an optimum amount of insurance policy is quite difficult and confuses the best of minds.

Practically, your life insurance requirements change every few years as you take on more responsibilities and your family grows. For an unmarried young man with his father still working, there is not much need for life insurance. But as one gets married, has kids and with dependent parents, the need for an insurance policy increases. Every insured person needs to review his insurance coverage periodically to match it with his increasing/decreasing needs. Factors like age, marital status, earning power of all employed in the family etc. have to be considered for arriving at your life insurance needs. Your financial investment planning should neither be in excess of your requirements nor less than what you must have. By under-insuring, your family may have to bear everyday financial hardships in the event of an untoward incident like death or disability of the insured. Similarly with excess insurance you could end up wasting a lot of hard earned money that could have been utilized for other household needs.

There are various methods available to help calculate your insurance requirements. Depending on your earnings potential and your ability to folk out regular premiums from your salary, the insurance plan should be able to:

• Provide minimum income protection to your family to uphold their present level of living standards. The basic requirements for food, clothing, shelter and education should be easily met with at current standard of living.
• Once you ensure that basic life needs are secure, you should plan your long term savings to meet goals and inevitable needs arising in future like child education, marriage, buying a house and vehicle etc.
• To remain independent throughout your life, you need some pension plan post retirement to maintain a respectable living standard and be able to meet the increased medical expenses. A good pension scheme taken early in life when you are young and healthy means lower premiums and regular income for old age.
• Finally, having planned and secured all immediate and future needs, you would also want your wealth to grow. Judicious financial investment planning should help you determine the long term wealth creation goals and how much you need to invest at regular intervals to achieve the same. Your life insurance India policy should be able to negate the effect of inflation and increase your wealth corpus.

The easiest and basic income based life insurance thumb rule agreed to by most financial experts says that you must insure 8 to 10 times your gross annual income for your family’s security. It will be even better if you can incorporate fixed costs like rent and fixed obligations like home loan, child education loan etc. along with minimum income ensuring insurance plan. Supposing your annual income is Rs 200,000 and your other long term fixed costs amount to another Rs 300,000. Then your optimum insurance policy should be for Rs 1,900,000 (Rs 200,000 * 8 + Rs 300,000).

Affordability of premium payment is another important factor to be kept in mind while planning insurance coverage. Going overboard with huge premium payouts for a large insurance policy can muddle up your daily finances. Plan to set aside a reasonable 6% to 8% of your disposable income for regular insurance premium payments to ensure that you do not face cash flow problems now. By planning the premium as a certain percentage of your income, you can scout for the maximum and best insurance cover available in the market at that rate.

Besides these general methods of life insurance calculation, you can also opt for well planned and comprehensive insurance calculation techniques like:

1) Total dependents’ needs calculation will incorporate all the current cash needs the your family after the insured’s death as well as the ongoing financial needs to main a certain lifestyle.
2) Sufficient insurance to replace the loss of regular income in case of premature/ sudden death or disability of the insured is also a good way of securing your family. This approach calculates the future expected earnings of the insured during his entire life time including promotions and the cost of inflation.
3) For people with big loans and mortgages, the asset preservation approach of calculating insurance cover is best. This ensures that the taxes and debt arising due to death of insured are easily taken care of while preserving the estate and assets at the current value.

Children Life Insurance Policies – What You Need to Consider

Are you amongst parents who think that the children life insurance policies bring bad luck for your little kids? Please rethink. These insurance policies offer substantial security to your family by protecting your members from the bad conditions that might arrive in the future. Most of the insurance policy holders belong to the age group of 25- 45. Even those engaged with life threatening professions, have insurance covers to protect their lives. However, this in no way means that only an individual who comes under imminent threat must avail the insurance covers.

Since accidents are inevitable, it is always advisable that you are insuring the life of your children with appropriate policies. There are a number of benefits of children life insurance policies which are discussed in this article.

  • There are a number of insurance companies that offer insurance payment options even when a child expires. This is applicable even after the expiry of certain period. The mutual funds mature by the time the child is ready to attain colleges. The financial burden which comes with college education, thus, gets reduced to a considerable extent.
  • The children life insurance policies assist parents who are tiding over loss of opportunity or business losses due to the tragic incident. While mourning, people might lose trade consignments or jobs and there by end up in financially distressful conditions.
  • The insurance policies meant for children can help parents plan a better future for their kids. Parents can offer a better life and career to their children. It is needless to say loss of life cannot be compensated with money. However, the financial assistance offered only helps you to make a fresh start for a better tomorrow.
  • Another good reason why you should purchase children life insurance policies is because you need to pay minimum premium rates over a substantially long period of time. This can be continued till your child starts earning. After your child gets employed it gets renewed to an adult insurance policy.

Get the right policy at ease with online research:

You can come across some of the best kinds of policies online. There are plenty of sites which specialize in finding the children life insurance policies. You need to entail detailed researches for the right price of the policy. You must be sure about your requirements. While you are reeling under financial constraints, insurance policies are the best course of action that you may consider. Evaluation of your goals and requirements will help you to choose the right kinds of policy. This is a must before you decide to undertake an insurance cover for your child.

Children are their prized possession for all parents. Each and every parent tries to ensure maximum security and comfort for their children. The children insurance covers help you to realize your dream and offer the best possible education and life to the children. You can be assured of resources at your disposal that can be utilized in times of needs once you avail of the insurance policies.

Who Can Be a Beneficiary on Your Life Insurance Policy?

It’s true. When you apply for a life insurance policy you must choose a primary beneficiary with an insurable interest in you if you want to get your life insurance policy approved by the underwriters. Insurable interest is generally broken down into two types of loss-emotional and financial. In order to have an insurable interest in your life, your beneficiary must fall into one of these categories.

Insurable Interest: Financial Loss

There are many individuals and businesses that could suffer a financial loss if you were to die. Your lenders many not get loans repaid in the event of your death, your spouse might not be able to support him or herself without the assistance of your income, your children may not be able to go to college. In addition, your parents, spouse, or siblings might not be able to afford your funeral expenses. Your business partner or boss may no longer be able to run the business properly and could suffer financially without your knowledge, image or experience.

When naming a primary beneficiary that will experience a financial loss at your death, no justification is required when that beneficiary is an immediate family member. If the beneficiary is a lender, business partner or boss, then additional documentation and letters of explanation may be necessary.

Insurable Interest: Emotional Loss

There is an undeniable group of people who would suffer an emotional loss upon your death. Your immediate family-parents, spouse, children and siblings would certainly feel a tremendous emotional void if you were no longer around. While this emotional loss does not necessarily result in a financial need, it does set up an acceptable environment for the issuance of a death benefit.

Unless you are naming a far removed family member as your primary beneficiary, there should be no need for a justification of the choice that you make. Be sure to be very clear about the amount that you want each beneficiary to receive if you are naming multiple beneficiaries. If you are leaving the benefit to a minor, consider setting up a trust in the event that he or she should receive the benefit before reaching a financially mature stage in life.

Exceptions to the Rules

There are always exceptions to the rules. If you want to leave your death benefit to a funeral home, although they would gain financially from your death, you can do so. This is acceptable because it simply avoids awarding funds to a middle man (such as a parent or spouse) who will only turn the funds over to the funeral home anyway. However, it is important to note that they will receive the entire death benefit when you do so.

If you have no family and no creditors, you may decide to leave your death benefit to a friend. In this event, it is generally preferred that you leave the funds to your estate and simply leave a will with instructions for the distribution of your estate assets. While this will result in your life insurance proceeds going through probate, it is a faster way to get your death benefit approved.

Once your policy is issued, the question of insurable interest no longer has any bearing and you can change your beneficiary to anyone that you would like. Just contact your insurance company and find out how you need to submit the beneficiary change information. Some insurers might have a form you need to complete while others might just request a letter. If you are not the owner of your own insurance policy, remember that it is the owner who must sign off on any beneficiary changes. Once your change is complete, let your beneficiaries know and keep a copy of the submitted change request with your policy to help avoid any confusion after you are gone.