Anyone who wants to prepare for his /her future or for that of his/her spouse or children should buy life insurance. Everyone (as long as he/she is eligible) should buy life insurance.
(1) it provides guaranteed protection that other financial programs do not and cannot provide,
(2) it is virtually risk-free and
(3) its returns are immediate and adequate the moment you need it.
That depends on your purpose for buying life insurance, whether it is for financial protection, investment, education or estate preservation.
You should buy insurance from a company based on its financial strength and stability, and the assurance that it will be there to fulfill its promises to you.
Use the following criteria:
(2) availability and
(3) company represented.
Over time (due to inflation or currency devaluation), the value of your life insurance reduces in real terms. One way of making sure that your coverage always remains adequate for the protection of your family is to upgrade your life insurance coverage every few years.
Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times your annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include income sources (and amounts) other than salary/earnings; whether or not the individual is married and, if so, what is the spouse's earning capacity; and the number of individuals who are financially dependent on the insured. It depends on how much you are worth, in terms of assets and financial strength, to your family/loved ones. It also depends on your savings goals for a college education, retirement or other purpose.
The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, such as 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Furthermore, the premium payment period often is shorter than the maximum period of insurance coverage. For example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.
Term life insurance is usually the least expensive and most immediate way of providing your financial dependents with a cash payout at your death. If you are a first time insurance buyer, purchasing a term policy and then converting to a permanent policy a few years later may be an attractive option.
Most frequently, term life insurance is purchased:
- to provide short-term protection, either to pay off a loan or provide a death benefit during peak earning years while children are young;
- by individuals or families who can not afford a permanent policy now, but need temporary protection until it is possible to convert to a permanent plan;
- to add a large amount of coverage to complement an existing permanent policy at the lowest possible cost.
Term life insurance pays a death benefit to the beneficiary you name that will:
- Cover your final funeral expenses, and;
- Provide a lump sum that can be invested to meet your dependents' on-going needs. You are covered for the full amount of life insurance that you choose for a specified period of time. The insurance can be both convertible and renewable, depending on the policy.
Term insurance traditionally works well to meet temporary insurance needs. Since the initial premiums are generally lower than those for universal life insurance, you can buy higher levels of coverage at a younger age when the need for protection is usually greatest. Term insurance is also an excellent way to cover specific needs that will disappear in time, such as mortgages or car loans.
As its name implies, term insurance only provides you with life insurance protection for a specified period of time. Term life insurance premiums gradually increase as you grow older. Coverage terminates at the end of the term and may become too expensive to continue on a permanent basis. The policy does not help you accumulate money for use at some later time in your life. If you miss a premium, the policy will lapse.