Wednesday, May 5, 2010

Life Insurance... High Protection Coverage for the Love of Family

For the love of family

As the word implies “to make sure or to ensure”, life insurance is a form of managing the risk - the risk of losing a major income. It is the family’s protection against loss of income when the main breadwinner dies.

Dying can happen to anyone. It is not a question of ‘if’ but of ‘when’. Only fate knows our destiny and the date of our death. To make sure that our beloved whom we might leave behind shall not have financial collapse, we buy insurance. The insured does not enjoy the insurance money. It is solely for his loved ones. Insurance agents call life insurance a symbol of love. You pay it and your family benefits from it. Life insurance is just like telling your family that you love them even if you will not be around, thus, providing them protection against financial difficulty. It originated long time ago with community people who have the thoughtful idea of financially helping the family who lost a loved one in the burial or funeral.

Term and whole life insurance

Term Insurance is the cheapest of insurances. It provides coverage at a fixed amount of premiums for a limited period of time, thus the word “term”. When that period expires, the coverage is no longer there. The client may acquire a new life insurance policy at a different payment term and amount. If the insured dies during the term, instant money shall be given to his beneficiaries. Term insurance is a life insurance, but the cheapest way to purchase a substantial protection or death benefit on a coverage amount per premium.

Whole insurance policy covers you for life, not just for a specific period like term insurance. Your death benefit and premium in most cases will remain the same.

Buying the right coverage

While most people buy insurance for the love of family, they do not exactly realize how much life insurance they need to serve just that. Coverage or the face amount should be big so that the interest alone can provide the beneficiaries money enough to equal the breadwinner’s regular income when he was still alive. That is instant money for income replacement, the very essence of life insurance and income protection.

Income replacement means to replace the income of the breadwinner. Thus, they should be of equal amount. When the breadwinner’s income was $10k a month, then income replacement should also be $10k a month. An example insurance coverage of $1.2M can give a $10k monthly income replacement. Put the 1.2M in a 10%-per -annum-yielding financial institution, and you will get exactly that. So simply, the breadwinner as the insured must buy a $1.2M life insurance coverage. Buying less than that will make him under-insured.

Insurance agents are trained to compute for their clients how much coverage to buy. For making a wise purchase of life insurance and right protection, clients have just to take them very seriously.

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