The first step in planning a life insurance is to determine what the expected economic needs are of the dependents that are to be left behind in case of death of the insured. People often commit the mistake of thinking about what their needs are when in fact, it is the needs of those that are financially dependent that has to be considered. Life insurance aims to help the insured ensure that his/her dependents remain financially secure even after the insured’s death.

An honest assessment of one’s financial situation and the standard of living that is desired to be maintained for dependents or survivors should be done. Careful consideration as to what could be, such as who will be responsible for the final medical bills and funeral costs, possible relocation of family or change in the standard of living are inevitable realities that have to be faced in case of death of the primary breadwinner or care-giver. Current life insurance needs for the family or individual can be determined by the assumption of immediate death.

After the initial readjustment of the survivors, consideration has to be given to the longer term financial needs. This would include dependency period income for children, income for the surviving spouse, mortgage and other debt payoffs, college education funds and an additional emergency fund. A suitable policy more or less anticipates the future as close as possible.

With the careful assessment of the expected needs of survivors, a person can decide on the most appropriate policy type. Life insurance needs change over time, thus a life insurance program should be periodically evaluated. A review is ideal at least once every 5 years or whenever major life event changes occur such as change in income or assets, marriage, divorce, the birth or adoption of a child or purchase of a major item such as a house or business.

Life insurance needs would vary among single persons with no dependents or with dependents, couples with children or no children and older couples. The choice of the type of policy would largely depend on what the insured wants to accomplish beyond his/her lifetime. Life insurance is a way of ensuring that his/her survivors have a fighting chance in life without him/her.

Choosing between Term Life and Permanent Insurance can be a very tricky issue. There are those that promote buying Term Life and investing the difference. The difference would refer to the savings plan component of Permanent Life premiums. Term Life is considered by most as the better alternative because of its relative simplicity, competitive pricing and flexibility. Permanent Life has tax-advantaged savings and investment options.

When a person expects to work through the late years, a cash value policy is more suitable. Term Insurance during this stage is extremely expensive or may not be available at all. A very young person has practically no need for life insurance which progresses to greater and greater need as a person takes on more responsibility. This need is expected to diminish as one grows older.

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