Issues To Think About

By Author: Norris Rios
Total Articles: 568
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When you plan to buy a vehicle, it's fairly obvious what the insurance issues are. To some extent, you can do the buying on auto-pilot (pun intended) by finding an online search engine and then simply seeing what quotes roll in. But when buying a policy to cover your life, you enter a rather more complicated area. We have to start with a distinction between life and auto insurance. It's possible to drive for years and never make a claim. This means the insurer can slowly reduce the premium rate, or hold it steady even when inflation kicks in. This reflects the total amount you have paid in without anything being paid out. But no one lives forever. So the calculation has to be rather different. You begin by estimating how much money you want available to your family. This amount is then divided by the number of years the insurer thinks you will live. This gives us a fixed premium during your life that, together with investment income generated by the insurer, pays out the minimum guaranteed amount plus any investment benefits when your life ends.

You have probably noticed the news that average life expectancy has been ...
... rising steadily. People born one-hundred years ago expected to live into their sixties. People born today are expecting to live not less than eighty years. This makes the task of estimating how much you will want to leave in your will very difficult. You may be asking the question in your twenties or thirties. No one can say with any certainty what life will be like in fifty years time. By then, the children will be grown and in good jobs. It will be for them to make provision for their children (your grandchildren or greatgrandchildren). So, before you commit yourself to buying a big policy, ask yourself why you are doing it.

A part of the answer is provision against possible bad luck. Averages can be deceiving. For every person who reaches one-hundred, there's a person who leaves before sixty. That's what makes the average at around eighty. So even though you might think a large amount is not of much use in the distant future, it would be very useful if you were hit by a truck in ten years time. That's the time when your family will most miss your earning capacity. That's why many people take the decision to buy term insurance to cover the family when they are most at risk. This means looking at your current liabilities. How much would it take to pay off your mortgage and any other big debts? How much do you estimate your children might need to pay their way through college? How much a year would be needed to keep your family going if they lost your income? These questions give you a basis for setting the amount.

Now comes the really big question. Is this life insurance policy only a safety net for your family short term, or do you want to leave a big cash sum no matter when you pass on? There are other issues but, in its simplest terms, this is what you must decide. It's a big investment over a long period of time. Why do you want this life insurance? Who is it for?The article asks some simple and basic questions about why you might want to buy life insurance. This is something you need to justify before you sign up.