Life insurance - how much do you need?
One of the most important and basic insurances available today!
Unfortunately I saw in person how important it was when a good client of mine died of cancer at the age of 42 leaving behind 2 small children and a husband.
When we are young, single and carefree we do not think about life insurance, but once a boy or girl is born the picture changes and we become more aware of its importance.
So how much life insurance do you need? Well the answer is subjective, everyone will decide what is good for them, but here are some suggestions:
Let's say there is a family, a couple + 3 children when the youngest child is 5 years old, the father is 50 years old and the woman is 47 years old
The husband earns 20,000 net and the wife earns 10,000 net
Assume that in 16 years (age 21) the child will be independent and can earn a salary and support himself, the calculation will be as follows:
Life insurance for the husband: 20,000 * 16 * (salaries) 12 = 3,840,000 NIS
It is also possible to capitalize at a customary interest rate of 4% = NIS 2,908,412
Life insurance for women: the same calculation will bring us to 10,000 * 16 * (salaries) 12 = 1,920,000 NIS
It is also possible to capitalize at a customary interest rate of 4% = NIS 1,454,206
Now that we understand the calculation we can decide that we are changing the age at which the child will be able to stand on his own two feet. Some parents want the child to do a bachelor’s or master’s degree or want to give some extra life insurance for extra security.
Then it is possible to change the age of the child in the calculation to age 25 or age 30 and then the amount of life insurance will increase.
Every year that the youngest child grows up, we can ask to reduce the amount of life insurance a little until it is completely or almost completely eliminated, and if we want the minimum amount absolutely, then we will also check how much we have to cover life insurance through mortgage life insurance. The pension fund in the event of death It is also possible to take into account ordinary or pension savings such as provident funds, education funds and surplus until the amount is reduced.
Important Note: Section 45A of the Tax Law allows you to receive a credit of 25% of the amount of the premium up to six years back (subject to review by a tax advisor) and thus you can receive thousands of shekels as a tax refund only from this.
Additional note: Each company has its own coverage ceiling that is subject to the age of the insured, if we want to avoid medical tests that take up our time, we can insure up to the ceiling in some insurance companies with a health statement only (subject to underwriting conditions and policy)