We insure our cars, our homes and even our mobile phones – so it goes without saying that we should also be insured for our full replacement value to ensure that our loved ones are financially catered for in the event of our premature death.
Life insurance will help you to financially protect your family. It could pay out a cash sum if you die while covered by the policy. You choose the amount of life cover you need and how long you need it for. You can pay your premiums monthly or annually.
Life insurance provides a safety net for your family and loved ones if you die, helping them cope financially during an otherwise difficult time. Ultimately, it offers reassurance that your family would be protected financially should the worst happen.
We never know what life has in store for us, so it’s important to get the right life insurance policy. A good place to start is asking yourself three questions:
What do I need to protect?
How much cover do I need?
How long will I need cover for?
This sum must take into account your family’s living costs, as well as any outstanding liabilities, such as a mortgage.
Life insurance makes sure they’re taken care of financially if you die. So whether you’re looking to provide a financial safety net for your loved ones, moving house or a first-time buyer looking to arrange your mortgage – you’ll want to make sure you choose the right type of cover. That’s why obtaining the right advice and knowing which products to choose – including the most suitable sum assured, premium, terms and payment provisions – is essential.
if your circumstances change. If you don’t update your policy as key events happen throughout your life, you may risk being seriously under-insured.
There is no one-size-fits-all solution, and the amount of cover – as well as how long it lasts for – will vary from person to person.
These are some of the events that should prompt you to review your life insurance requirements:
Buying your first home with a partner
Individual lifestyle factors determine the cost
The price you pay for a life insurance policy depends on a number of things. These include the amount of money you want to cover and the length of the policy, but also your age, your health, your lifestyle and whether you smoke.
Replacing at least some of your income
Two basic life insurance types
There are two basic types of life insurance: ‘term’ and ‘whole-of-life’, but within those categories there are different variations.
The cheapest, simplest form of life insurance is term life insurance. It is straightforward protection, there is no investment element, and it pays out a lump sum if you die within a specified period. There are several types of term insurance.
The other type of protection available is a whole-of-life insurance policy designed to provide you with cover throughout your entire lifetime. The policy only pays out once the policyholder dies, providing the policyholder’s dependants with a lump sum, usually tax-free. Depending on the individual policy, policyholders may have to continue contributing right up until they die, or they may be able to stop paying in once they reach a stated age, even though the cover continues until they die.
Remove the burden of any debts
Generally speaking, the amount of life insurance you may need should provide a lump sum that is sufficient to remove the burden of any debts and, ideally, leave enough over to invest in order to provide an income to support your dependants for the required period of time.
The first consideration is to clarify what you want the life insurance to protect. If you simply want to cover your mortgage, then an amount equal to the outstanding mortgage debt can achieve that.
To prevent your family from being financially disadvantaged by your premature death and to provide enough financial support to maintain their current lifestyle, there are a few more variables you should consider:
What are your family expenses and how would they change if you died?
Term Life Insurance
A good option for family protection