How To Determine One’s Life Insurance Requirements?
Life insurance is a boon available to us and we must make the most of it. People typically want their families to be able to pay off their debts when they die. The best way to determine your requirements is with a needs analysis. A good needs analysis will look at immediate, ongoing and future expenses which include any outstanding medical bills and the cost of a funeral.
Below are certain things to ask yourself to be able to select the most appropriate life insurance plan.
What your liabilities are?
Is your salary the only source of income for the entire family or is there another source (other earning members, inheritance, etc) of income?
How many people are dependent upon you?
Once you have answers to these questions, you will be able to understand which life insurance policy you need for yourself.
Different plans have different benefits and costs. As a result you need to be fully sure about your own requirements to take full advantage of the available features. Once you determine your need, just buy the lowest cost insurance plan that's available to you. You should only buy it after a thorough calculation of capital (lump sum needs on death such as paying off a loan, daughter's marriage or education) as well as the income needs of your family after you are gone.
What kind of policy is best suited?
There are different kinds of policies and you must have a clear understanding of these before you make your purchase. The different kinds include:
A. Term life insurance - Your life is insured for a specific term and if you happen to die within this term; your nominees will receive the sum assured. If you outlive the policy, you won't get anything in return. This kind of a policy is best suited for a person who is young and free of serious family liabilities. A term life insurance is an effective yet inexpensive type of life insurance.
B. Traditional plan - In a traditional life insurance policy, you stayed covered for a longer period of time and at the end of the policy you get the money that you invested, back. This is a kind of policy that combines insurance and investment and is well suited for people with dependent family members. So analyze your needs to understand what kind of policy you would require. Speak to your insurance agent and see what the available options are.
Finally, remember that your insurance needs go down over a period of time. However, buying the wrong kind of life insurance can quickly transform the boon into a curse and you will end up paying more than receiving. Apart from this, even after being insured, your nominees may not benefit properly if the policy is incorrect or inadequate. If you find yourself with a sudden windfall or have accumulated enough wealth, then you can evaluate the need to altogether terminate your insurance policy. As a result, go through your own requirements and analyze your needs very closely before you buy a life insurance policy.