There are many reasons people and businesses buy life insurance. The main reason is to replace lost income. This writing will focus on income replacement as the reason for purchasing a policy.
It is common to be insured for 10-15 times one's annual income.
If a husband and wife each earn $50,000 per year, a good place to start is for each of them to be insured for $500,000 regardless of the type of policy.
Planning ahead is a good idea but the best place to begin is where someone currently is.
In the event of an unexpected, sudden death by either spouse, the $500,000 death benefit would provide 10 years of current income.
Why 10 years?
It's a place to begin. It's not a rule. Considering that many couples have kids at home, whether or not they do, 10 years of current income allows a surviving spouse plenty of time to recover from the emotional set back and make plans to carry on. It allows for choice about whether to keep or sell the house or relocate without being forced to make that decision right away. Perhaps the long-term plan is to be able to provide a college fund.
There are countless different scenarios and every situation is different.
Once the amount of death benefit has been determined, the next step is to decide how much money can be set aside to pay for it.
After that the main questions people need to answer are how long insurance will be needed and if there is a desire or need to take advantage of the tax favorability of life insurance while still alive.
Realizing that situations and needs change with time, it's probably best to allow for the change.
The first reality is everyone will die someday.
It's probably best to buy at least a small permanent policy that will be used for burial and final expenses. Depending on what the budget will bear, it may be best to buy as much permanent insurance as possible
Article Source: http://EzineArticles.com/9016996
0 comments:
Post a Comment