The life of every individual is precious and if you are the only bread bearer of your family and the other people are dependent on you then you should consider the financial safety of your family when you are no more around to take care of them. Life insurance is one such financial scheme by which you can take care of your family members and loved ones even if you are not around and they can be financial secured after you death as well. Life insurance plans provide financial coverage to the family member of the policyholder after she or he comes across any unfortunate incident. The financial coverage provided by the life insurance policy deals with the death of the policyholder because of any reason.
But before opting for the life insurance policy, one must get well aware about all the features of the life insurance plans
The life insurance plans are designed so as to provide death coverage. There are various types of life insurance schemes in the market for the people to fulfill the different needs of the individual and her or his family members. Life insurance plans is also one of the way by which you can reduce your financial taxes and can also add various riders in the life insurance scheme to gain the maximum benefits at the time of any uncertainty or casualty. One should be very clear about the fact that the financial coverage provided by the life insurance companies are not for the advantage of the policy holder but for the dependents of that policy holder. The policy holder can choose to get additional benefits from the life insurance schemes by choosing from the various life insurance options available or by adding special features to the pre existing life insurance policy.
When you finally decide to purchase a life insurance policy, the first question that will pop up is that which type of life insurance plans you are looking for. And to answer the question you must be well aware about the needs of your family in the future years and their lifestyle and what all major life events are yet to come in the coming years. After evaluation of all of these, another major question arises that how much death coverage your family will be needing when you will be no more to help them out of the financial crisis. This is a major question that will determine the type of the life insurance plan you will need and also the duration of the life insurance plans as well.
How much life insurance coverage does your family really need?
The experts have approximately estimated average life insurance coverage of worth 5 to 10 times your present annual income. But this is also not a fixed amount as the every family is different and the needs and requirements of every individual varies with time as well and the living standards also have a major effect as the deciding factors for the life insurance coverage amount.
All of these questions related to the life insurance plans can be answered by a simple evaluation of the needs of the family and their expenditure and their lifestyle. Before you immediately hop on to choose the life insurance, some of the pre-requisite work has to be done.
What are the pre requisite calculations that needs to be done before applying for the life insurance plans?
There are few key steps that need to be followed in order to choose the amount of life insurance coverage and to fix the duration of the life insurance policy. Have a look at these few important points that will definitely need attention
- What are the needs of the family?
Evaluate the details about the needs of the family. How much budget does the family require to run efficiently, is there any kind of loan or mortgage or debt pending on you, any major life events that are about to occur in the coming future, the amount that will be spend on the medical treatment and the funeral expenses, or any estate taxes that are being imposed – all of these factors are important to determine the amount of financial coverage you need from your life insurance plan. Once you have done the mathematics for the above, you will reach an amount which will be closer to your death coverage needs.
- Any future emergency financial needs.
Uncertainties and casualties occur without any intimation and they can prove to be dreadful for the financial stability of the household. So one should also include the major financial obligations that are supposed to occur in the future into their life insurance coverage. Also evaluate the sources of the cash inflows in your family even after you are no longer here.
List all of the assets and resources that you own.
It is also important because the assets and resources would also help you in deciding the life insurance coverage amount. The difference in the amount of the needs of your family in the coming years and the total assets that you own would help you to decide how much insurance is required.