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Are you sure you’ve calculated the right amount of life insurance to fully protect your family’s financial future?
While life insurance can provide financial stability in those instances, people have many different needs for life insurance. For families, life insurance can provide income replacement and security.
A common approach taken by insurance companies is to take 100% of regular premiums, being the annual premiums received for a policy, and 10% of single premiums. This assumes that an average life insurance policy lasts 10 years and therefore taking 10% of single premiums annualises the single lump sum payment received over the 10-year duration.
The insurance company then uses that information to calculate a life insurance rate for you. Bear in mind that this is just an estimate since the exact amount might change following a medical exam.
Permanent life insurance is life insurance that covers the remaining lifetime of the insured. A permanent insurance policy accumulates a cash value up to its date of maturation. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
Life insurance actuaries determine the probability of death in any given year, and based on this probability determine the expected value of the loss payment. These expected future payment are discounted back to the start of the coverage period and summed to determine the net single premium.
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