Life Insurance Quote Review Site

The human life value method enables you to calculate how much life insurance you need. This can be effectively done in several ways:

• 1. Subtract from earnings, a reasonable estimate of annual taxes and living expenses spent on the insured, in order to arrive at the actual salary needed to provide for family needs. Commonly, this is a percentage of salary. Rather than calculating a composite of each separate need, it is often suggested that the survivors will need around 70 percent of the pre-death income to carry on after the insured’s death. A higher or lower percentage may be needed depending on a particular family’s circumstances. The percentage age of salary needed can be more accurately determined through a detailed examination of the family budget.
• 2. Determine the length of time the net earnings need to be replaced. This could be until the insured’s dependents are assumed to be grown and to no longer need the financial support of the insured, or until the assumed retirement age of the insured.
• 3. Select a rate of return with which to discount the future earnings. A conservative estimate on rate of return would be the return on treasury bills or notes, or the rate of return paid for death proceeds left on deposit with the insurance company. A life insurance company will leave a death benefit in an in an interest bearing account. The rate paid on this type of account is the rate that should be used. A safe assumption would be the rate on a money market or certificate of deposit account.
• 4. Multiply the net salary needed by the length of time needed, to determine the future earnings. Then calculate the present value of the future earnings using the assumed rate of return. This calculation can be performed using a spreadsheet, specialised software, a financial function calculator, or by using discount interest tables.

 The human value method is useful in situations where replacing the income lost due to death of a breadwinner is the primary concern. However, this method only replaces income.

In some countries parents are investing in endowment life insurance policies with a view of saving policy and obtaining a lump sum on maturity of the policy to pay for their children’s education. This is understandable when one considers the rising cost of education, even in the UK.

In the US, where college or university fees tend to be relatively on the high side compared to other countries, some parents take out a number of endowment life policies. The idea is to make an advance provision based the sum or sums insured so that by the time the kids are due to start University, the money is here to pay the fees.

Another way is for parents to take out a policy or sometimes a series of policies on their own name or life and then taking loans to cover the costs of the university fees. On maturity, the lumps sum is then used to pay off the loans. This is obviously useful if the time left to benefit from the endowment policies does not correspond to the time you absolutely need the money. Effectively, the loans are bridging loans until the life endowment policies come to maturity and pay the lump sum.

Many parents though are determined to send their children to university right from an early age. So, sometimes they plan the policy 20 years in advance, in fact right from the time the child is born so that by the time the latter is about 20 years old, the policy comes to maturity and the money is readily available to be spent on the child’s education. If it is an endowment policy with profit, there may even have a bit of money left for other things.

Taking out a life insurance policy would protect your family if you were to die as it pays out a lump sum upon death or if you are diagnosed with a terminal illness.

Your commitment to any life insurance policy is that you fully disclose all information asked when taking out the policy. If you were to be diagnosed with a terminal illness for example and you were to make a claim and did not disclose all information this may result in your policy not paying out and will therefore come to an end.

You must inform your provider who your are taking out the policy with if your circumstances were to change for example if anything was to happen to a member of your family, you change jobs, your level of alcohol intake changes, you were to start smoking or you have had the use of recreational drugs. Again if you do not disclose this information then this may lead to your policy being cancelled and therefore not paying out.

The risk factors involved when taking out such a policy is that if you were to stop paying the monthly premiums then after the 30days the policy would cease.

The policy also has no cash value at any point throughout the term of the policy. Upon the even of death the policy will pay out the sum assured agreed at the start of the policy to help your family and at this point the monthly premiums no longer need to be paid.

With the majority of life insurance plans you are not tied into any particular contract. If your premiums stop then your policy will stop and you will no longer be covered for any of the benefits you have chosen.

No premiums will be paid back and if you want to restart the policy after it is stopped this may not be possible.

if you do want to restart the policy then there maybe a charge to do this, or ask for proof that you are still in good health. They may also ask for proof that your occupation and leisure activities have not changed and are no more of a risk than they were previously.