But when we ask how a reasonable Sum Assured?, Well at this point they are generally not as good an explanation previous explanations, they are generally still able to ask the amount of premiums paid annually prospective customers. So to avoid this condition is useful to discuss some of the methods commonly used by a financial planning across the globe but before that we as a candidate for life insurance policyholders should now have:
1. Economic value that is a result of the income year in which the value of our average in every month, or for a net amount of salary an employee is brought back to the house. Sum Assured for the benefit of our focus is only on the economic rather than simply whether or not the salary.
2. The presence of individuals other than our own are quite dependent on the economic value, eg wife, husband, son, brother, sister or parent who has retired.
3. Other concerned parties in the fund business activities, such as personal loans or bank debt out of other financial institutions that do not have life insurance. So when we plan to make loans from the Bank or financial institution, we must ask whether there is life insurance policies they?
So it is not worth it if we buy life insurance with a condition: 1. The lack of economic value; 2. The absence of other people who depend upon us; 3. The lack of hook loan debt,
Then how do I compute the optimal Sum Assured, the following is the explanation most frequently used methods:
1. Human Life Value method, this method of calculation of the absolute Sum Assured is calculated based on the average revenue per month that we count a year and multiplied by the expected duration of the fund sustain life until the beneficiary is able to earn their own income. This method does not need to consider funding the growth factor if the Sum Assured is stored in a bank or other investment institutions.
2. Income Based Value method, this method of calculation of the absolute Sum Assured is calculated based on the average revenue per month that we are a year divided by a factor of growth funds for the Sum Assured shall be deposited in investment institutions other than banks.
3. Financial Needs Based Value method, this method is more specific to protect the future financial needs eg education funding. In practice to avoid paying a huge premium then this method can not stand alone but must be combined with a constant monthly investment (annuity) on an investment instrument that has an average return on deposits. It should be noted this method is different from the two previous methods, but this does not protect the income of future financial needs.
Now for more details see the following case: A father of 35 years had a net income of 5 million per month, their wives housewives have 1 child aged 9 years. If the father dies the amount of the Sum Assured is as follows:
1. Human Life Value: 5 million * 12 * 5 = 300 million, this means that if taken at 5 million per month will last for 5 years (not counting interest or growth funds).
2. Income Based Value: (5 million * 12) / 6 per cent = 1 billion. Explanation: Why is divided by 6 percent? Because if the Sum Assured is accepted, the funds placed on a fixed income investment instruments rather than on deposits. Historically has a performance range of 6 percent a year on the s / d 8 percent. So the money amounting to 1 billion will produce 5 million per month for 1 billion * (6 persen/12) = 5 million.
3. Financial Needs Based Value: well this method to protect their future education expenses if the father dies. Suppose the cost of education at the university today is 200 million in the nine years of education costs to be approximately 550 million with an estimated increase of 12 percent annually. So the Sum Assured to protect the education costs amounted to 550 million, or less expensive if you want to be the Sum Assured shall be 275 million but with a combination of investments in mutual fund shares by 250,000 each month with a target of a minimum return of 18 percent per year.
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