Life Insurance: How the insured capital is calculated
In life insurance, the sum insured capital in the policy is one of the key elements to be considered before buying. It is the amount that will determine the degree of protection they provide to beneficiaries at the time of realization of the insurance and one of the variables that most influences the price of the premium. It is very important to calculate the insured capital of our life insurance for our policy and its cost.
In Spain, a report showed that Life Insurances being signed have too tight protection. According to their statistics, life policies that were signed in 2015 had an average insured capital of 38,646 euros and a duration of fewer than four years. Given that the average salary in Spain is just over 22,600 euros per year, even with this amount, two annual revenue would be offset, without any outstanding debt or obligation. For more about financing advice, visit financespaces.com
While it is true that in the life insurance can not speak of underinsurance, because you can not put a price on a human life, the truth is that life insurance policy may be insufficient to meet the reasons that prompted his recruitment: offer economic support to the family, protect a person who may be to sustain the household economy if he or she can not continue to maintain the family unit because of disability.
What should we take into account to calculate the sum insured Life Insurance?
In general, the insured capital of a life insurance is usually calculated policy based on annual family income. Given this figure, it is usually multiplied by 3 or 5 times in each case and circumstance. The situations of each household are often very different, and it is best analyzed in the specific case of the Life Insurance and adjust the sum insured to personal circumstances, risks, and liabilities that may arise in each case.
In this regard, it is important that you take into account debt and outstanding obligations when calculating the compensation of the policy, as they can be the main obstacle for a family to take back normal financial condition when one of the members contributing to their economic input is missing.
In short, these circumstances should be considered based on:
Outstanding loans or mortgages
If the client of life insurance is paying the mortgage on the house where the family resides, it is desirable that the sum insured capital cover the amount of capital with the aim that the family home is free of charge.
The mortgage is perhaps the biggest loan that a family can face, but it is not alone. If a consumer applies for loans or any outstanding debt, they should be taken into account for the insured capital to cover.
Depending on the composition of the family and the responsibilities that fall on the insured person, they may have different needs . A married couple with children who are studying in the university needs more resources than a couple without children.
Another determining factor when calculating the insured capital of life insurance is in the income of the household. The impact of the loss of one of the two members of the family in the event that the two partners have income, or only one of them has is different.
Keep in mind that returning to normal after a loss takes time, especially if it is a member of the family that brings a lot of revenue. Economically, it may be years until the family resumes the stability of income.
How the insured life insurance money calculated?
Once you have made an overall assessment of the situation of the family, you can make an analysis of income and costs borne by the household. Do not forget the factors that differentiate each other’s homes. For example:
- How many children are in the family and what ages.
- What people are in charge (dependent).
Given these factors, we move to the analysis of fixed and future expenses of the family unit to define the need for resources that the family has when the insured person is unable to continue providing their income. We talk about:
- Home expenses: water, electricity, gas, phone, food, etc.
- Vehicles, maintenance and transportation costs.
- If you have children, we must add the cost of school, extracurricular activities, college tuition, books, etc …
- Outstanding debts: mortgages, credit cards, personal loans, etc.
- Related to death, such as inheritance tax, expenses will, fees, expenses, etc …
It is adding the costs the family will have to face when the insured person can no longer contribute to their income. A quick way to calculate the insured money on life insurance is to set an amount five times greater than the net annual salary of the insured person and add a number of outstanding debts. Thus, some economic cushion the family is offered for a reasonable time and frees you from loads that can become a serious problem, such as the mortgage payment.
We must compare life insurance to get the cheaper one
On the other hand, we consider that the price of life insurance should suit the customer ‘s pocket. There is no limit to put the sum insured capital in the policy we want, although the insurer will ask why that amount is justified, especially in the cases that a very high capital is established.
However, the more we fix sum insured capital in the policy, the price of life insurance will rise, so you should study well the future needs to fit present possibilities to afford the insurance premium.
Also, not all life insurance are equal. Therefore, you should compare the various offers of insurers to find the policy that best suits your circumstances. In this sense, a comparator insurance online can help you to buy a life insurance for the measured and an adjusted price. Just give it your data, it will compare, and find out for you the life insurance which offers more attractive from a selection of leading insurers in the market. In this way, you can get the best insurance at the lowest price.