Life insurance, a term that everyone’s heard of, but most people know little about when it comes to the specifics such as the level of cover they need. Because a lot of people are unsure of just how much life insurance they need, they tend to avoid getting it altogether.
Determining whether you need life insurance will depend on a number of individual factors, but there is one way to help you reach the conclusion as to whether you need life insurance cover or not.
Not Sure If You Need Life Insurance?
If you’re unsure, ask yourself: would your family be able to cope financially in the event that you are no longer able to provide for them anymore due to your death? We know it’s not a pleasant thought, however, in order to protect the ones you love, you do need to consider these things.
What is Life Insurance?
Life insurance (sometimes known as Life assurance) helps provide financial security for people who depend on you, should you die. Upon your death, your beneficiaries will receive a cash free lump sum so that they can carry on as normal as possible in your absence.
There are different types of life insurance – the most appropriate type for you will depend on your circumstances. Life insurance will pay out either a single lump sum (sum insured) or a regular income when you die.
Is Life Insurance for Me?
If you’re trying to decipher whether life insurance cover is worth investing in, we can help. Do you have dependants, children or a spouse that heavily relies on your income? Do you also have a mortgage on your home? Are you the one that primarily pays the bills each month?
If so, things like the mortgage and household bills will still need to be paid each month in your absence, so it’s vitally important to consider where the funds are going to come from in order to pay these bills.
Pay Off Your Mortgage
A mortgage is probably the single biggest financial commitment you will have. Therefore, ensuring your family’s home is theirs should you die is one of the biggest drivers for investing in life insurance. You should think about how much is outstanding on your current mortgage, as this should be paid off by your life insurance.
Whilst you should make sure you cover your mortgage, you might want to make sure you’ve covered your other bills and expenses, such as utilities, car costs and other insurances.
Look After Your Children
You know your family better than we do, but we know that you still want to be able to provide for them in the event that you are no longer around anymore. If you have younger children, you’ll probably need to consider increasing the amount of cover you get, than if your children were older.
Younger children may need childcare and school uniforms etc. and older children might go to university, which all needs to be factored in. You might have planned on helping them out with a car, or house deposit and with life insurance in place, you can still do that for your children.
Different Types of Life Insurance
There are different types of life insurance available and identifying the most appropriate type for you will depend on your circumstances. You can have a life insurance cover payout either as a single lump sum or to provide your family with a regular income when you die.
This is the simplest type of life insurance cover and you choose how long you’re covered for, for example, the term can be 20 years and the policy pays out if you were to die within the agreed term.
You can also take out term cover as a couple with the policy paying out on the first death only during the term. There are several different types of term policy available, depending on your needs.
Family Income Benefit Insurance
This is essentially the same as term insurance, but instead of paying a lump sum when you die, it will pay out a regular income instead, acting as a wage. This type of payment may be more suitable where the main purpose of the policy is to provide ongoing financial support to dependants.
Whole of Life Insurance
This type of life insurance pays out a lump sum when you die, whenever that is, as long as you are still paying the premiums.
The length of your cover depends on what it is you want to protect. Taking into account the remaining term of your mortgage, the age of your partner and children helps you work out how long you need cover for.
Why Get Life Insurance
Although money can’t replace a loved one, it can help those left behind to weather the financial storm. For example, it could pay off the mortgage or provide an income to help cover regular household expenditure. Life insurance is worth investing in if you have dependants and you want to provide them with a financially secure future.
So what are you waiting for? Give us a call and talk to our expert advisors about life insurance today.