Notes on life insurance
ow much life insurance should a man own? That depends on what his responsibilities are. People’s needs differ. Family needs differ. Goals, ambitions, desires, and needs—all are likely to be different for an individual and family.
How then can a man tell how much life insurance he should own? The best way is for him to sit down with his family and first figure out what his responsibilities and goals are. What are the specific ambitions, desires, and needs of the family?
Among the things that a man may want to consider are protecting his family by covering the immediate expenses in case of his death such as hospital, funeral and taxes, income for his family, education for his children, a home free and clear of any mortgage, and possibly a retirement
income for himself. Once these goals are determined, he would naturally turn to the person best qualified to help him fit the life insurance to these goals—his Life Insurance Agent. Thus, there is no answer to how much life insurance a man should own—it depends entirely on what he needs and what he wants his life insurance to do for him.
A common misconception is that a wealthy man with substantial property and assets has no need for the services of life insurance. In a way, there is some truth to this thinking. However, there are two things that he cannot avoid – death and taxes. When a man dies, a new personality is created—and that is his estate, which will be subject to taxation. A traditional function of life insurance is to provide financial security for survivors in the event of the untimely death of the head of a family, and the proceeds of a life insurance policy are not subject to taxation if the insured has designated his beneficiary as irrevocable. In other words, the proceeds of life insurance can be effectively utilized to settle estate taxes.
An individual, more often than not, purchases more than one life insurance during his lifetime. The policyholder should, as much as possible, keep these policies in force by paying the premiums on time and in accordance with the payment schedule of quarterly, semi-annually, annually, or up to a certain age. Once a regular life insurance policy has been in force for several years, there are cash values and other options stated in the policy that can be exercised by the policyholder. The circumstances of a man often changes with time, and even if an insured wishes to continue his premium obligations, he may no longer be financially capable of doing so.
Finally, an individual should not keep any lapsed policies among his personal important documents. This is to avoid any frustration on the part of his named beneficiaries. In fact, a lapsed policy that cannot be reinstated is a useless document and should be thrown away.