The choices when it comes to life insurance can be a bit confusing and it becomes very important to understand exactly what life insurance is all about and whether you really need it. The main reason of a life insurance is to make life easy and bearable for your dependants in the sad event that you are no longer available to take care of your financial obligations. It therefore means that there are certain situations when life insurance may be irrelevant in your life. For instance, you won’t need a life insurance if you are alone and you don’t have any dependants. The insurance may also be insignificant if you do not generate a good proportion of your family’s income but if your salary is what supports your family in terms of paying rent, mortgages, and other recurring bills, then you have every reason to go for a life insurance.
There is actually no rule of thumb when it comes to the amount of life insurance you need. There are a number of factors that dictates the amount you should go for and they include factors such as your level of income, the current debts you are servicing, the number of your dependants, your lifestyle amongst the rest. It is however advised that a good amount should be between five and ten times of your annual earnings.
There are basically two types of life insurance policies that you can choose from. Just like there are a number of factors in determining the amount to choose, there are also a number of considerations that you need to take into account when choosing on the type of life insurance.
Term insurance is one of the two types. Experts recommend term insurance if you are under the age of forty years and you don’t have a family disposition for a disease that is of a great threat to your life. With this policy, you will have death benefits but with no cash value. Term insurance will always be less expensive as compared to the whole life insurance.
Whole life insurance on the other hand will offer you death benefits as well as cash value and it is recommended for individuals above the age of forty and those with a disposition to a life threatening illness. Under this plan, you will pay regular premiums over the entire life of the policy until your death. During the process, you will have built a cash reserve for your dependants once you die.
Other than the whole life and the term life insurance plans, there are also variable life insurance plans and universal life insurance plans. With a variable life policy, you can build a cash reserve which you can later on invest in one of the options offered by your insurance company.
Universal life policy on the other hand will give you the ability to vary the amount of your premiums by using them to cover part of the costs. Be sure to discuss each detail with your insurance agent so that you have the right information before making your choice.
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