There are several methods to purchase the life insurance. One can purchase enough life insurance according to his family and needs. Some of these methods or rules are given below:
1:premium as percentage of income:-
According to this rule a minimum of six percent of the whole gross income of the insurer is spent on purchasing life insurance policy. An additional one percent is added to this for all the family members. Once the insurer determines the whole percentage of income spent on purchasing life insurance the agent can also advise him to purchase enough life insurance for the premium amount.
2: Family needs approach:-
This is another method to determine the purchasing amount of the life insurance for a person and it’s family. In this method first the person determines the percentage and then according to it he purchases enough life insurance so that it fulfills all the needs of his family after his death. This method is further divided into two major categories;
1: immediate needs on death:
In this category the family of the insurer has all the needs at the insurer’s death.they demand the cash from company immediately to fulfill their needs.
2: on going needs:-
The needs that remain the whole life in family after the death of insurer. Those needs are called on going needs.
So the insurer has to purchase enough life insurance and with such a good planning that it should fulfill all the immediate as well as ongoing needs.
3: Income replacement method:-
This method is based on the theory that the insurer should purchase enough amount of life insurance that he can afford on his income during his lifetime also including the factors such as income increase and other funds.
4: the estate preservation needs:-
This method takes into consideration the needs that the insurer’s family faces on his death. Those needs are included in it to maintain the current value of his estate of family while the need of cash on that event. These needs are such as taxes, fees, expenses and debts etc.
The application process:-
When a person applies for the life insurance then there is same procedure as usual. Its process is quite common. The person whose life is to be insured should be present at the time when the application form is being filled and he should fill the form by hand. The agent should also be present to guide the applicant in filling the form.
There are three parties involved in insurance parties. These are:-
1: the proposed insured:-
This is a specific person whose life is being insured by the insurance company.
2:- the applicant:-
It is the person who is applying for the life insurance and filling the form. It can be the proposed insured but it is not necessary.
3: The policy owner:-
This is the person that owns the policy and usually pays premiums to its insurers and it can also be a large company.
Usually the contracts are given to the persons more than 18 but in life insurance the age restriction is 15 years. The one who purchases life insurance policy then his parents or guardians have to sign on his application necessarily.
Correcting the application:-
There are chances for mistake and during the filling of this form. A minor mistake can cause a major problem. In case of any mistake the application can be cancelled from the company. So care should be taken to avoid any mistakes in the form.
The receipt located at the bottom of the application form is called the conditional receipt. The agent collects the first full premium from the insurer at the submit of the form.
The conditional receipt becomes very important when the insured dies before the policy issued. In this situation two decisions can be taken:-
1: if the insurance carrier would have been issued by the company then it must pay all the premiums to the insurer’s family.
2: if the application is denied or rejected due to any reason then the funds are not payed to the insurer’s family.
Representatives and warranties:-
All the rules and regulations on the application form are considered to be true. Some of those are not true but the policy holder should consider them true as it is a rule and he should follow it.
The warranty is a statement of absolute group and there is no warranty included in the application form that is to be followed.