Who needs life insurance and why ?
Your friendly, neighborhood life insurance agent is most likely to answer this question with the
Hot Topics
- What is the difference between a Life Insurance Broker and a Life Insurance Company?
- A Life Insurance Company is the organisation that actually writes your policy and covers the policy risk. It is also their name that appears on your policy documents and it is their duty to make any payouts if you make a claim.
- What is Whole of Life?
- A Whole of Life Assurance policy has no predetermined termination date and it will continue in force until the policyholder dies or they surrender the policy.
- What is Mortgage Payment Protection Insurance?
- Mortgage Payment Protection Insurance will pay your monthly mortgage repayments if you were off work because of sickness, an accident or unemployment.
- Complaints about a Life Insurance Adviser
- If the Life Insurance Adviser is regulated by the Financial Services Authority then he will have provided you with his Terms and Conditions at the very first opportunity.
The fact is, not everybody does need life insurance. If you don't have a family, you probably don't need life insurance unless, of course, you're a really nice person and just want to leave some money to a friend or a charity.
If you do have a family, the question isn't do you need life insurance. The question is how much do you need?
A life insurance sales representative may want you to apply some kind of formula. In years gone by, he or she might have told you that you need to buy insurance equal to four times your annual salary. So, if your annual salary is $50,000, you might have been told you need at least a $200,000 policy. Today, the same agent might tell you that you need eight times your annual salary or a $400,000 policy.
In most cases, this is probably too simplistic an approach, as it tends to assume that you are your family's sole provider.
Today, there are a number of other factors that should be taken into consideration. Does your spouse work or is he/she a stay-at-home mom or dad? Are you a single mother or father? And where does that put you? How old are your children? Will your surviving spouse be ( personal loans ) raising kids for three years or 15? If your spouse works, how much does he or she earn? If something should happen to you, is there family nearby that could help raise your kids or is the nearest family 1,000 miles away?
Let's take a hypothetical example. Jim W. is 45 years old, earns $75,000 a year and has two kids age 15 and 17. Jim's wife, Martha is 43 and earns $50,000 a year. Jim and Martha believe their kids are college material. How much life insurance does Jim need? Let's assume $25,000 a year times the two boys, times four years. That's $200,000. Jim also wants ( cheap loans ) to make sure Martha lives comfortably for the rest of her working life and figures she'll need an additional $25,000 a year to do this. Multiply this $25,000 by 22 and that's $550,000. Add this to the cost of the boys' college, and Jim needs at least a $750,000 life insurance policy ... and that doesn't include anything for Martha's retirement!