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Life insurance is a kind of insurance where a company
pays the insurer’s family on the death of the insured person. Life
insurance is a good method of making one’s future secure. It makes sure
that if the earning member of a family dies in some accident or due to
ailment then the family is paid the insured amount to take of the
expenses. A person can take life insurance and make his wife or children
the beneficiary. One should avoid buying life insurance for children
because if the earning adult dies then the children and the wife need
money, not vice versa.
One should buy an appropriate life insurance for himself that has easy
claim and comprehensive coverage. One should pay the premium on time and
fully so that the family gets the maximum possible amount if something
unlikely happens. One should go for as high amount as possible for
insurance because there is no value of the security of family. A number
of government and private insurance companies are now offering life
insurance. One should keep in mind that money can never compensate for
one’s life’s worth.
If one insures himself for 25 years and he pays the premium. If he dies
during this time frame, his family gets the money. If he doesn't,
neither he nor the family gets anything. If one takes an endowment
policy, he wins both ways. If he survives, he gets the insured amount at
the end of 30 years. If he does not survive, the beneficiary gets it.
The only problem is that the premium in an endowment policy is much
higher than a term policy. And, if the premium is high, people might be
tempted to go for a smaller sum as cover.
To decide the amount of money that one should invest for the life
insurance for child and family, one should first make a list of monthly
expenditures that his family makes. Also, he should take into account
the extra expenses that may come the family’s way on his death. One
should include:
i. Monthly expenses: Rent (or monthly outgoings to the society), utility
bills, food bills, household expenses, daily travel, etc.
ii. Multiply these by 12 to get the annual figure.
iii. Annual expenses: festivals, vacations, gifts, birthdays, etc.
iv. Sporadic expenses: clothing, medical expenses, shopping, etc
v. Study expenses for the child or children of the family.
One should also add an inflation of 5%. One should also insure his home
loan so that if during the repayment of loan he dies then the amount the
family owes to the finance company can be repaid back by the insurance
amount. This makes sure that the family will have a roof on their head.
When calamities hit, the natural tendency is to dip into the savings
allocated for the child. However, if one plans for contingencies, the
chances of doing so reduce. Moreover, one is not only investing for the
child, but is also ensuring the child does not have additional burdens
to deal with should something happen to him.
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