Life insurance and basic guidance
1. Economic justification for life insurance* Final expenses / last expenses, which are the obligations incurred by the family member at the end of his life, such as his pre-death hospital bills, funeral expenses, debts, credit card, taxes and attorneys' fees. The family is supposed to dispose of the last expenses immediately after death
* The family's lack of periodic income from which she lived during the family life
Therefore, the purpose of life insurance is to pay a lump sum in the case of the death of the family member to pay the last expenses, and the remainder of this total amount is deposited in the bank or is invested to generate periodic income from which members of the family live in prosperity without crises or troubles, so the economic justification To buy life insurance is financial dependency If a person earns an income on which others depend for their livelihood and well-being, life insurance is used to replace this income
2. Early death
Early death means the death of the family's breadwinner, leaving behind outstanding financial obligations such as child support, education, care and unpaid debts, so premature death may cause a severe financial crisis for surviving family members after they die, because they have forever lost their share of future income, Alternative income from other sources is insufficient and their property is inadequate. Therefore, the cost of premature death is the loss of the family's share of family income and the expenses associated with the death itself (such as funeral expenses, unpaid medical bills before death, Unpaid debts) and low standard of living. In addition to the non-economic cost of grief, grief, lack of a family member, and the change of family style, the term premature death in insurance companies means the death of the insured in the early years of issuing the document, The first three years
3. Types of families
3/1Single person
In the case of the death of a single person who does not have dependent children or dependent dependents, his death does not cause any problem or financial crisis to others, other than his need for a small insurance amount to cover the final or final expenses, but the single person must take care of pension needs when The age is advanced and referred to the pension
3/2 Traditional family
A traditional family is a family in which a parent is the one who works, for example the husband is the one who works and the wife sits at home to take care of the children, the family and traditional family needs a large amount of life insurance, and even the wife who sits at home to care for the children need To insurance because her death meant the need for an alternative childcare solution
3/3 The family has one parent-parent family
The death of a family member with one parent causes a severe economic crisis for the remaining children without the presence of the father and mother, so they need a large amount of insurance, and the number of families with one of the parents is increasing due to divorce or premature death. The family member who is considered a parent needs a large amount of insurance Life
3/4 Mixed Family blended family
A mixed family is a family in which the widower or divorced wife and children are married to a new husband and he also has children. It is possible to have new children after marriage, and the death of one spouse will lead to a lower standard of living if he works and earns an income before his death
3/5 Sandwiched family
Is the family in which the son and his children (or daughter with her children) support his elderly parents or one of his parents, so this family is like sandwiches, and the sandwiches are children and parents, meaning the new generation and the old generation both need financial support and support from The son (or daughter) is the middle between the new generation and the old generation (meaning the son is what is inside the sandwich) and this son (or daughter) needs a large amount of life insurance
3/6 Family with working spouses and children with income earners with children
In this type of families, both husband and wife work outside the home, and the death of one of them causes economic instability to the remaining members of the family because the joint income is necessary to maintain the standard of living of the family, so either of them needs a large amount of insurance, because Insurance replaces lost income in case of death of either
* Insurance experts recommend not to insure the lives of children in all types of previous families or at least not to buy a large amount of life insurance for the child, because the children are dependents and not the breadwinners, and because the parents are the livelihood and support of the children, so be wise and wise to pay The premium in life insurance for the family's family rather than the life insurance of the children, and because the money is limited, the payment of the installment in the life insurance of the children reduces the amount of insurance on the life of the family breadwinner is insured less than enough.
4. Quantity of insurance (determination of amount of insurance)
The need for insurance is necessary and urgent for wage earners who are breadwinners and have no assets or wealth. When a family member decides he needs insurance, the next step is to determine the amount of insurance he buys, but the quantity The insurance he needs changes whenever his life changes. For example, the greater the number of children, so the amount of insurance must be periodically reviewed until he is sure that he is covered with adequate insurance. If he does not do so, he will be covered with insurance without sufficient underinsurance. Death, and estimate the amount of insurance The rule or principle of thumb refers to a rule or an entrenched principle of experience or of life guided by it but does not refer to precise knowledge or accurate measurement, for example do not spend more than half of your wealth In buying a house, or do not hit the boys with a thicker stick of thumb, the following are the most important thumb rules used to determine the amount of insurance purchased by the family's breadwinner.
5.opportunity cost of buying insurance
A family member may need a large amount of insurance, but the large amount of insurance is limited or restricted by the so-called opportunity cost of buying insurance, which is sacrificed by the purchaser of the document when he buys it, and because the income is limited, buying the insurance will reduce the estimated amount of income Available to purchase the highest priority needs of insurance, the majority of heads of households are heavily indebted, mortgage payments, car loan or pay the credit card and pay taxes and monthly invoices for electricity, water, gas, telephone, purchase of food and clothing and expenses of education of children, The family member with limited income can spend a limited amount of income to buy cheap insurance, which is temporary insurance. After determining the amount of insurance that is desired, In buying it, the next step is to determine the type of insurance you buy
6. Advanced range of life insurance products
To overcome criticisms of traditional life insurance policies, insurance companies in countries that follow the concept of monetary value have created a range of life insurance products that pay the insurance only at the death of the insured at any time, the most important of which are the following:
Flexible life insurance.
Variable life insurance.
Lifetime variable flexible locking.
Lifetime document with current assumption
The whole quality of life insurance is that the document pays the insurance only when the insured dies, so it is a permanent life assurance. There is no end date for the document because the document pays the insurance amount at any time the insured dies. Therefore, the nominal value mentioned in the document (the amount of insurance) represents the death benefit, but this basic quality is not an absolute or uniform law for the difference of insurance practices between countries. For example, there is a life insurance type called ordinary life insurance life policies / straight life policies In countries that follow the concept of monetary value, a document that pays the amount of insurance to the beneficiary specified in the document at any time the insured dies, or pay the amount of insurance when the insured reaches the maturity age of 121 years, and pay a fixed periodic installment to the company The period of payment of the installments is throughout the life of the document. The document shall have a monetary value during the validity of the document, on the basis of which the amount of liquidation, loan or reduction shall be calculated.
The maturity in life insurance documents is not absolute or unified law. In some countries, 100 years and some documents do not contain the age of entitlement because they pay the insurance amount only at the death of the insured.
The second type of life insurance is the payment of a fixed periodic premium to the insurance company throughout the lifetime of the document. However, this second characteristic is not an absolute or uniform law. The document states that payment of the installment is stopped at a certain age or after a certain number of years. Pay a single premium at the beginning of the document.
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