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How Much Insurance Do
I Need? |
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There
are a
number of methods of determining one's need for life
insurance. A significant part of your conclusion will
be based on your philosophy with respect to family
security issues.
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1. |
A
simplistic method
of determining your need is
known as "programming". That is to say, "I want my
family to have a certain number of years of my income",
i.e., five to seven years plus the cost of funeral |
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expenses,
college costs and emergency funds. Total these amounts,
discount liquid assets and the result will be the amount
of coverage that you will require.
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2. |
In
order to do a long-term approach to your family's
security needs, you would take a "capital needs"
approach. With this method, you determine your family's
monthly and annual budgetary needs (i.e., 75% of
your gross income) and capitalize that amount, assuming a
conservative interest rate, such as 3% to 4%. An example:
if your gross income is $50,000, your family may need
$37,500 or 75% of that amount per year to maintain their
lifestyle. At 3.75% annual interest, your family would
need $1,000,000 of liquid capital, or insurance, to
produce that |
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income indefinitely. Other considerations would be
the inflationary impact on the income needs,
lifestyle changes and other objectives.
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3. |
There are many other reasons why you would need
insurance, such as business reasons, debts, pension
planning, estate planning, etc. |
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Which Plan Is Right For
Me? |
| Currently, insurance companies offerings include 1
year increasing term and level payment 5, 10, 15, 20 and
30 year term prices. The 1, 5, & 10 year policies
are best for people who want to keep their policies for
no more than 10 years. Usually, if you feel that your
need is at least 5 years, you may best be served by a 10
year policy because the cost will be substantially less
than the 1 or 5 year basis when looked at on a
cumulative basis. There are extenuating circumstances
and unique situations that arise with some applicants.
The 15 year and 20 year policies are very well priced. A
brief evaluation of the figures with respect to your
personal family situation will quickly reveal which
alternatives are best. Additionally, you may layer
coverage to coincide with diminishing needs. This is
something that you could benefit from a brief discussion
with an expert. |
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Are There
Special Discounts For Multiple Lives? |
| Yes, but companies that are offering multiple
discounts are a minority. |
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Why Is One
Insurance Company More Expensive Than
Another? |
| Factors
that make one insurance company more competitive
than another are as follows. A company may decide to
specialize in a sale of a particular product and gauge
their profits based on volume. Secondly, companies
profit margins on a line of business, underwriting
considerations, are very important and the overall
financial integrity of the company can be a factor as
well as contractual provisions dealing with conversion
and renewability may differ. |
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How Does My Health
Affect My Quote? |
| Underwriting
considerations are most important in
evaluating companies and determining what the actual
price for your insurance will be once the company has
completed their evaluation. Factors that most commonly
affect your rate are blood pressure, the need to take
certain medications, cholesterol readings and ratios,
family history, smoking status and history as well as
other health history. If there are any questions on any
of these issues, a consultation with an expert would be
useful before selecting a company. |
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Why Should I Buy From Orchard
Financial and Insurance Services? |
| Orchard
Financial and Insurance Services monitors and
selects from the entire universe of insurance products
in the market. We search for the most competitive rates
from financially sound companies. Our firm will assist
you in evaluating all alternatives. You will receive a
personalized approach in the selection, processing and
ongoing service once you have made your
decision. |
