Estimating Coverage needs

Life insurance provides payments to your beneficiaries that replaces some or all of your income if you die during the coverage period.

In exchange for insurance coverage, the insured person makes periodic payments called premiums to the insurance company. The person making payments is also called insuree and the insurance company is called the insurer. The insuree is also called the policy holder.

Most life insurance policies are taken out to replace family income in the event of an untimely death. As a result, these policies often designate a spouse, child, sibling or parent as beneficiary. The policy may also designate more than one beneficiary.

Some types of life insurance allow you to change your premiums or stop paying them for a while. These premiums are called flexible premiums. This situation occurs if the investments that are funded by some of your premiums earn a higher than expected rate of return.

The following can help you determine your coverage needs.
1. Determine your coverage period
2. Calculate the expenses that require coverage
3. Reduce the amount of required coverage by available assets and income
4. Add estimates for inflation,interest rates on savings, and taxes
5. Find other ways to lower your premiums

Since your health is a large determinant of your premiums, consider avoiding tobacco and alcohol. A healthy medical history helps. Skydiving, motorcycle riding and scuba diving are activities with higher accident and fatlity rates. Avoiding these kinds of insurance risks can help to lower your premiums.