Determining The Amount of Life Insurance That a Buyer Needs
February 10, 2017
After establishing that a person needs a life insurance policy, it is logical that he/she determines the amount of life insurance policy that he/she should buy. The person should consider a lot of factors when determining the amount of insurance policy that he needs. Here we look at determining the amount of life insurance that a buyer needs.
Debt – Determining the Amount of Life Insurance
Before a person can choose a life insurance policy, he/she must check how much debt he/she has. A person with a lot of debt cannot afford to choose a life insurance policy that requires high monthly or annual premiums although it will pay out a large death benefit cover.
A policyholder should strive to find a company that charges relatively low premiums but pays out a relatively high death benefit.
Job and income stability – Determining the Amount of Life Insurance
The only way that a person can afford to pay the required insurance premiums is if he/she has a job or other source of income.
A person must not invest in paying higher premiums with the hope of receiving a large payout. Especially if his/her income is not that huge.
A stable source of income means that a person is guaranteed to pay his/her monthly income and his/her dependents are guaranteed to receive the death cover.
Dependents needs – Determining the Amount of Life Insurance
A person should determine the amount of cover depending on the number of dependents he has and their specific needs.
A person with fewer dependents does not need to take a life insurance with higher premiums or significant death benefit.
At the end of the day, there should be a reasonable balance between the premiums paid, the net income of the policyholder and the amount of death benefit cover.
A policyholder pays low premiums when he is younger and high premiums when he is older.
Although is quite normal that a policyholder will require the largest pay-out for his/her independent, the true value or near-perfect value of life insurance that he/she needs can be achieved by doing some calculations.
When making the necessary financial calculations, a person must consider the following factors:
- Age and needs of dependents
- Age of Policyholder
Term life insurance versus Whole life insurance
A person must only choose term life insurance if he/she requires insurance for a specific amount of time. Term life insurance ensures to meet the policyholders needs future such as pay for his/her child’s tertiary education.
Although the premiums for whole life insurance are higher than those of term life insurance, they are constant.
It is easy for a policyholder to deal with insurance premiums that are fixed and do not change.
Insurance or Investment
If a person wants to make investments on top of his life insurance policy, he/she must buy a universal insurance policy.
When you purchase an insurance policy, a person must do so while he is in good health. It gives him/her a chance to pay low premiums.
To get a FREE life insurance quote, complete the form on this page and click on the “Get a Quote” button.
All info was correct at time of publishing