Life insurance is necessary because it protects your life and family. Many people are reluctant to discuss about the importance of life insurance while others are ignorant about how life insurance can help them. If you are the sole breadwinner, you have to purchase life insurance to provide financial support for your family after you die. Senior couples can purchase life insurance to provide a form of revenue for them after they have retired. Senior couples may deplete their savings account to cover the medical bills.
Most people purchase a life insurance coverage that is equivalent to 5 or 6 times of your annual salary. Alternatively, you can buy the life insurance based on your individual needs. To calculate how much you need to cover, you must add the living costs such as food, transportation, nursing care, housekeeping, daycare and etc. You have to calculate the short term financial cost such as loan, and tuition fees. You should take into account the income replacement for your spouse if she is not working. In addition, you must calculate your own expenses such as burial cost, estate taxes, medical bills and etc.
Life insurance falls into two main categories including whole life and term life insurance. Whole life insurance offers permanent protection until the end of your life term and cash value. A portion of the premium that you pay towards the insurance company will be deposited into the cash value account. Term life insurance only offers protection for a specific period of time. You won’t have access to the premium and investment you made in term life insurance if you did not die within the policy term.
