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According
to The Wall Street Journal, a family can maintain its standard of living with an
after tax income of 75% following the death of the primary breadwinner.
But if a family winds up with income of less than 60% of the level, serious
disruptions can occur. After reading a number of studies that address the
subject of "How Much Coverage is Appropriate?" We recommend that our
clients insure 75% of their after-tax income if funds are available to pay
premiums and not less than 60% if they want to avoid disruptions, e.g., pulling
children from a school, selling the family home, etc., in the family's standard
of living. See the Financial
Underwriting Guidelines to determine the amount of insurance that is
appropriate for you.
Life insurance can be purchased as term insurance or as traditional insurance.
Both term and traditional insurance can be purchased by you as an individual or
by your business as group insurance.
Term insurance does not include a savings component. For this reason, the
outlay is less expensive than traditional insurance. According to an
article that appeared in The Wall Street Journal, the outlay for traditional
insurance is 10 times greater than for term insurance. Policy forms
include level term and decreasing term. Level term can be purchased as
annual renewable term or 5, 10, 15, 20, 25 and 30 year renewable term. In general, term
insurance is indicated when your need for life insurance is to cover the time
you are raising a family and can not afford the outlay for traditional
insurance.
Traditional insurance includes products that contain both a protection component
and a savings component. This is the reason why the outlay for traditional
insurance is higher than the outlay for term insurance. Typically, a
policy owner earns 5% on the savings component of a traditional insurance product
such as whole life, limited payment life or universal life. Traditional
insurance products are recommended when there is no longer a need to provide for
dependents and the policy owner wants to use his/her policy as a savings vehicle
or there is a need for traditional insurance to satisfy an estate planning need.
Considering the importance of life insurance in estate planning and planning for
dependents, we recommend that our clients call our toll-free number and ask to
speak to a representative. There is no charge to do so and the information
will be kept confidential. After discussing your needs, we will be happy to send
you a free survey of the insurance companies that offer the type of coverage
that you request. Our toll-free number is (800) 501-8078 or E-Mail us at Kaplanmanagement.net
Who needs Life Insurance?
Most people purchase life
insurance to meet the future needs of dependents such as a spouse, a child or an
elderly parent. Some buy life insurance for the added purpose of building
up cash reserves for future needs such as retirement or college tuition
expenses.
You have to be in reasonably
good health to take out an insurance policy. Generally, insurance
companies won't insure people who are in bad health because it's the risk of a
sudden death that hits their pocketbooks. they also shy away from people
in high-risk occupations, such as high-rise construction. But even people
whose occupations or health conditions make them unattractive to insurers can
obtain insurance if they shop around.
An insurance company
determines whether you are a good risk by reviewing important personal
factors. This means that your application is reviewed for health factors
(smoking, weight, heart disease and so on), family history, occupation, gender
and your financial condition. Industry statistics reveal that 93 percent
of the people who apply for insurance are accepted at the so-called
"standard" rate. That means they are expected to live a
"normal" lifetime, at least according to statistical
probabilities. About 5 percent are accepted as a higher risk. Only
about 2 percent of the applicants don't qualify at all.
To
check insurance company ratings, click Moody
,
Standard and
Poors
or A.M. Best.
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