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There is no getting around death. You will die. I will die. Most of the time, we hardly think about death. Usually the idea of ​​our own mortality is forced into our minds when one of our loved ones dies. It is normally a fleeting thought, replaced by real responsibilities, work and more urgent commitments. But the reality is, we just don't like to think about death. Because the subject of life insurance forces us to think about our death, so we don't like to think about life insurance.

It just isn't fun to do. But, it is necessary to think about such insurance, especially if you have a family that depends financially on you as the breadwinner. Failure to take on this responsibility means you put your family at risk of becoming destitute if the unthinkable happens. No matter how much we want to avoid facing death, we just need to take our financial responsibilities to those we leave behind.

Risks covered by life insurance


Life insurance can be used to protect against many types of risks, both personal and professional, such as:
1. Ordinary life insurance - Proceeds from an insurance policy used to replace loss of future personal income due to premature death. The face amount (aka “amount of coverage”) required to meet this need depends on several factors, including loss of income, monthly housing costs, other available assets, and so on. A simplified approach, which gives you a rough idea of ​​mandatory coverage, is to divide your annual earnings by 5%. For example, if your annual income is $ 50,000, you will need $ 1,000,000 of insurance coverage ($ 50,000 divided by 5% equals $ 1,000,000).
2. Life insurance buy-sell - Proceeds from an insurance policy used to acquire a deceased partner's interest in your business. The face amount required to meet this need depends on the fair market value of your business multiplied by your deceased partner's interest in the business. For example, if your business is worth $ 1,000,000 and there are two partners, that requires insurance on each partner equal to $ 500,000. The business can be the owner / beneficiary / payer of the premiums of the life insurance policy or each partner can be the owner / beneficiary / payer of the premiums.
3. Key Man Life Insurance - Proceeds from an insurance policy used to secure the services of a deceased employee with unique skills. The company is the beneficiary of the plan and therefore pays the premiums for the insurance policy. Key person insurance is necessary if the sudden loss of a key executive would have a material adverse effect on the business of the business. The payment provided upon the death of the leader essentially allows the company to find a new person or to implement other strategies to save the company.
4. Second Death Life Insurance - This is an insurance policy that insures two lives (you and your spouse). If the last deceased spouse has a taxable estate, the proceeds of this insurance policy will be used to pay federal and state estate tax. For example, if the future estate is expected to generate an estate tax of $ 1,000,000, you would want face amount equal to that amount. This ensures that your heirs receive every dollar from your estate.
5. Estate Transfer Life Insurance - Proceeds from this type of insurance policy are used to leave a bequest to a charity of your choice.

Types of life insurance policies


1. Term life insurance - Term life is "term" insurance. It only provides for pure annual coverage (no investment component as in other types of policies). On the death of the insured, he pays the insured capital of the policy to the designated beneficiary. The younger you are, the cheaper the term premiums. On the death of the insured, he pays the insured capital of the policy to the designated beneficiary.
2. Whole Life Insurance - Whole life insurance provides “permanent” insurance coverage and allows you to create a near-retirement investment account that is tax-sheltered. This policy will remain in effect for your entire life as long as you make the required premium payments. It is more expensive because part of your premium is used to create an investment asset called a cash value. This cash value accumulates tax-free, unless you cancel the contract before death.
3. Universal life insurance - Universal life is another type of “permanent” insurance. Universal is more flexible than Whole-Life, offering permanent insurance protection at low cost as well as a savings component that, like whole life insurance, is invested to provide an increase in cash value. The death benefit, savings component and premiums can be reviewed and changed as a policyholder's circumstances change.
4. Variable life insurance - Variable life is similar to universal life insurance, except that it offers a wider choice of investments.

To sum up, four basic principles should be considered when valuing life insurance:
1. Determine your needs.
2. Understand the different types of policies available.
3. Determine which policy best meets your needs.
4. Review your insurance as your needs change.
5. Select a professional specializing in life insurance.
Tom is a Chartered Public Accountant, Chartered Financial Planner, Certified Long-Term Care (CLTC), and President of Cerefice & Company, the largest CPA firm in Rahway, New Jersey. Tom works with clients to help them manage their money, planning for retirement, college savings, life insurance needs, IRAs, and qualified plan transfers with the goal of maximizing tax benefits and minimize taxes. Tom is founder of the Rich Habits Institute and author of "Rich Habits".

I will give you an example of the basics of life insurance in Australia


Life insurance began in Australia in 1833 when the company issued a policy to Joseph Tice Gellibrand. Gellibrand died four years later, so his policy was also the first paid claim. This company still exists today as an Australian insurance provider.
In 1849, a not-for-profit insurer was formed, which then expanded its scope to include banking, managed funds, and other financial and investment services. Their name changed was eventually listed on the stock exchange.

Another large insurance company started as an insurer in 1914. Unlike the first two companies, they started with workers' compensation services. Currently, they offer several types of financial protection services, including life, home and auto insurance.
As times have changed, more and more insurance companies have sprung up in Australia. They are now available to provide insurance quotes online and no longer require the insured to come to the office. The types of insurance plans have also changed over the years. There are more options now than in the past, so customers can choose more suitable life coverage.

Current policies


These companies, along with many others in Australia, offer several main types of financial insurance packages. Term life insurance is the most basic and oldest form. In exchange for fixed payments, the policyholder has the guarantee that in the event of death or diagnosis of a terminal illness during the term of the contract, his beneficiary will receive a fixed amount. The main use of this type of policy is to cover funeral costs and other costs related to death.

Rather, total permanent disability insurance (TPD) offers protection in the event of permanent and total disability of the policyholder. This policy differs from the first in that it is not limited to a fixed term but applies for the rest of the life of the insured. The main utility of this policy is to provide financial stability to both the policyholder and his family and dependents in the event that he is no longer able to work.
A similar policy offered by life insurers in Australia is income protection insurance. Typically, this type of policy offers a guarantee of up to 75% of a policyholder's monthly income if they are unable to work due to documented illness or injury.

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