Whether you require a life insurance is determined by your personal situation. If you do not have a family or any dependents perhaps you don’t require a life insurance. Nor do you require one if your family is not dependent entirely on the income you are making. But if your family is supported mainly by your income then life insurance plays an important role in the event of your death that the financial responsibilities are met.
While taking a life insurance there are many factors you need to see into regarding how the amount you need to take. Generally it is said 5 to 10 times of your annual income. A few aspects you need to look into are
How many dependents you have? Is there any other source of income in your family? Do you have any debts? What is your current lifestyle? What plans do you have for your children’s education? How secure is your family setup?
Now once you have decided for how much amount you wish to take the insurance policy, think over on what type of policy you require. They are basically four types.
Term Life: This type of life insurance does not offer any cash value but a death benefit only. Though it is the cheapest of all life insurance, the drawback is that you don’t receive even the premium in the form of cash.
Whole life: This sort gives death benefit and cash value unlike term life. A cash reserve is built out of the interests of the premium. This is invested by the insurance company in different saving programs but the owner has no control over how it is invested. Ultimately after 25 years, the premium and the benefit are obtained. This is much more expensive that the term life insurance.
Variable Life: Variable life insurance is similar to whole life as far as receiving cash value and death benefit. The difference lies in the advantage that you can invest the cash reserve accumulated according to your choice. That means, your investment can either grow or deteriorate according to the stock market scenario. This type is the most expensive of all life insurances.
Universal Life: This is a flexible policy which offers both term and whole life. It is cheaper than whole life but more expensive than term. The cash reserve built up can be used partly to cover the premium cost. Also at different points you can change the death benefit amount for which you will have to pay small administrative fees.
In short you must have a life insurance policy to provide replacement for your income for your survivors if something happens to you. It also comes to your rescue to pay off any debts and giving your family an added financial security. It provides enough funds for your family for unexpected expenses like medical bills or other domestic emergency repairs. Most importantly, it would support you to educate your children, which could not only be expensive but require a long term plan.