Not everyone needs life insurance, it’s true. If you have no family or dependents then right now you do not need it. Once you have bought a house, got married and start a family you will definitely need insurance – well, to be accurate you don’t need it, your family does. By having adequate insurance, all your financial obligations will be met when you die. If you feel that you may need life insurance, the next step is to ascertain whether you need a whole life or a term insurance policy and how much you need to be covered for. Generally, if you do have dependents you should buy term rather than whole life.
Term Life Insurance
Term insurance covers you for a term – a specific amount of years. You pay the monthly premium until the end of the term and you may then have the ability to renew, but because you are older, the premiums will be higher. If you need insurance and choose term life you will have:
- Lower premiums
- Full payout – the beneficiary will receive the full amount of the policy if you die within the term of the policy
Whole Life Insurance
Whole or permanent life insurance, or cash value insurance, has a guaranteed premium guaranteed for your entire life. It offers:
- Stable, but higher premiums – your premiums will never increase and your beneficiary will receive the benefits upon your death, but the premiums are higher than term life premiums.
- Cash value. Whole life insurance has a cash value. You gain interest as the cash value increases. Interest growth is tax deferred – you do not pay taxes on the income while it remains in your policy.
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Once you have determined which type of policy you need, you must then calculate how much the policy should be for. Life insurance is meant to make up for your lost income and take care of other outstanding debt, so your family is not saddled with it if you die. Don’t ask me why, (it’s very complicated) but multiplying your present income by 17 should bring you to the amount you need life insurance for. So if your income is $50,000 a year, you would need $850,000-worth of insurance. An experienced insurance agent should be able to discuss your needs and help you to decide exactly how much insurance your family needs, as each family differs.
Consider any debt you may have, including mortgages, car loans, college or tuition expenses for your children, consumer debt including credit cards and medical bills. Then consider additional living expenses for your spouse, if she must return to work to support the family there may be the additional weekly costs of childcare for example. Contact an experienced insurance agent to learn more about term life insurance and whole life insurance, to find out which choice is best for you and your family, and be sure to look for the best-rated companies when you need life insurance.
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