Question

You are the financial advisor to two families.

Family A has two college educated and employed parents with 3 kids, all under the age of 10-year-old. Family A has recently purchased a home and the parents plan on working until they are 65.

Family B is made up of two grandparents in their 70s raising their two grandchildren (both under 15). Tragically, the children’s parents were killed in a car accident 2 years ago. There was no life insurance on the deceased parent for the kids.

1. What type of life insurance policy would you suggest for Family A if any? Why?
2. What type of life insurance policy would you suggest for Family B, if any? Why?

Answer 1

A) I would like to recommend Family A to buy a good Term Insurance Cover for himself. I am assuming that parents are employed and he is taking some loans to buy the Home. The parents have the liability to service the loan as well as take care of their three children. So,they must buy a good Term Insurance Cover and the cover amount need to be atleast 50% more than the loan amount. With this cover the parent hedge their risk of loan default as well as some amout to take care of their children.

I also want to recommend Endowment life insurance policies for their three children because at this age their Insurance premium will be very low for bigger Sum Assured.

B). I would like to recommend some Term life insurance cover for the Grand Parents if there is any policy able to cover them. So that there Grand sons receive the amount and spend on their studies and livelihood.

I would also like to recommend Some Insurance Cover for their Grandsons that have the Rider benifits.The reason for this recommendation is that the company will charge higher premium and provide Rider benifit. So, if Unfortunately Grandparents died the remaining policy premium paid by the insurance company and the cover will continue for Grandsons.