By Andrew Lipsitz
One of the most important aspects of a sound financial plan for a family is making sure that the family income is well protected in case of an injury, sickness or death. The purchasing of insurance has a few major benefits. When the primary provider for the family gets sick or injured it is extremely important for them to be covered. While income decreases for a family in this situation, a common misconception is that family expenses stay at the same rate. The truth is, family expenses increase as a result due to medical bills and other costs that go along with a sickness or injury. So while income decreases, expenses rise, create a distressed situation for the entire family. Life insurance can be thought of as protection against leaving your family and loved ones with bills to pay off. A claim from a life insurance policy, depending on its size, can cover up to years of income, creating a pillow for the family’s financial situation.
In finding an insurance company, the most important aspects to look for are the company’s financial situation and a company’s claim-paying ability. While the two usually go hand in hand, financial strength does not necessarily mean that their claim-paying ability is on point. In such cases you would usually want to look at the company’s claim-paying history. Another way to determine which company is right for your family is by researching the major rating companies such as Moody’s and Standard and Poor’s ratings.
How much insurance should a family buy to keep them protected? Well, this question remains different for everyone, obviously. The point of insurance is to keep the family living the same lifestyle should the breadwinner become ill or pass away. So, the first step is calculating your spouse’s and your children’s annual expenses, as well as funeral costs, and decide how long of a period you can afford to cover them , since premiums are not cheap. As a rule of thumb, you should posses more insurance earlier in your marriage to cover expenses down the road. Later in life, around retirement, the need for insurance is minimal since you and your spouse have already accumulated a life savings and you are usually no longer paying for children’s expenses.
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