1: Who should take out Life Insurance
Life Insurance is a way to replace your or your spouse’s income in the event of your 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 do I need?
As mentioned above, it should be enough to replace your current income.
For example, if your current income is $50,000, then you should purchase insurance for approximately
$50,000 x 10 = 500,000.
Why multiply by 10.
The logic is if your beneficiary invests $500,000 and earns at least 10% a year on that.
Then they will have at least an annual income of $50,000.
3. How many types of Life Insurance are there?
There are 3 types of life insurance policies
1: Term Insurance 2: Whole Life Insurance 3: Universal Life Insurance.
4: What is the difference between these 3 types of insurance?
term life insurance
One of the most common types of insurance companies offer is term insurance, often called pure insurance. With this type of coverage, a person purchases a policy for a specified monthly premium with insurance available for a specified time or term, and generally only pays upon the insured’s death and does not accumulate cash value.
This is the lowest cost insurance, but it serves its purpose well, because due to the lower cost, everyone can afford it and can insure the total insured amount needed.
Whole Life Insurance.
In addition to having the life portion insured, in all life there is also an investment portion that gives this policy a cash surrender value.
This is the most expensive insurance.
Universal Life Insurance
Like the entire policy, it has a cash surrender value. In addition, the cash value available with a universal insurance policy can also be used to make policy premium payments.
5: What are some of the disadvantages of the different types of insurance?
I personally believe that the purpose of any insurance is to replace your income in the event of your death, not to be mixed with your financial goals.
If you want to earn any income from your financial investment, you must open a separate investment account.
Attaching a part of the investment to the insurance policy makes it very expensive, which leads people to not insure themselves.
Second, insurance companies typically pay much less for the portion of the investment they earn, so this is the downside of having comprehensive insurance.
So I personally recommend Term Insurance.
There are also some downsides to term insurance.
If you miss some premium payments, your policy will be canceled and you will need to have a medical exam to reinstate it. Now, if you took out the policy when you had no medical conditions and now when you have some medical problems, you may be denied future coverage or, if allowed, it will be very expensive because of your current medical conditions and your older age. . .
Taking a Life Insurance is a very important decision, you should consult a trusted Financial Planner or an Insurance Broker, before buying the policy.
