Q. I hear and see ads for Life Insurance all the time but don’t know how much cover I need or if I need any at all. Where should I start?

First you need to decide whether you really need life insurance then you need to find the right type. Once you get this right, you’ll get the peace of mind that comes with buying the cover at the right price.

Do you need life insurance? 

The answer to this question depends, ironically, on whether anyone depends on you. For example, if you have children, then yes, you probably do need life insurance – because they depend on you financially. This is the case even if you don’t work outside the home or are an unpaid nanny/cleaner/chauffeur/cook/secretary or superhero of the household. If you want to protect your contribution to your family’s finances in the event of your death, you need life insurance. 

And children aren’t the only dependents you need to think about. If you don’t have children, but you do have a joint mortgage, and your partner could not meet the monthly payments on his/her salary alone, then again, life insurance is probably a good idea. Otherwise your beloved could be thrown out by the mortgage lender after your death, and – if the property is worth less than the mortgage – pursued for the rest of the debt. Not a pleasant thought.

Similarly, if you support or look after someone financially in any way, be it a friend or relative, then you should consider taking out life insurance to protect them should the worst happen to you.

 

Ask yourself are there people in your life who depend on you financially? If there are, then life insurance is an absolute must. It’s just as important that you get the right amount of cover too. This is not a decision to be taken lightly, so how do you do it?

 

1) People often make the mistake of only buying enough life insurance to pay off their mortgage. But protection needs often go far beyond that. 

 

2) You need to think about how much it would cost to replace your salary and provide for your family if you were no longer around. You should always have enough cover in place to clear your mortgage in the event of death. But you also need some extra cover to pay for everyday living expenses so your family can maintain their lifestyle.

 

3) Contact your Financial Broker to help you work out what cover how much you really need.

 

4) You should also think about how long life insurance should be in place. Typically people buy policies which last until they retire or until their youngest child is financially independent. 

 

5) But it’s also important you don’t have too much life insurance. Over-insuring yourself is a waste of money. By taking some time to calculate how much cover you need more accurately, you should avoid this problem. Your Financial Broker should be able to go through this with you. Get advice.

 

This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated financial broker, before acting on anything contained in this article.

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