The reason for the need of life cover is to be able to meet the financial demands you may leave to someone in the event of your death. This could take the form of a mortgage or an outstanding loan that was acquired for the car or that family holiday you decided on. It could also be that yours was the largest or sole form of income into the household. The fact is that the loss of yourself will mean the loss of a large, if not the total, amount of income coming into the household.
So let's start at the beginning. Do you have a mortgage or loan outstanding and do you have them insured? If you do, and if they are as yet not insured, assess what the amount of that loan or mortgage is. Whatever the value of the mortgage or loan is the amount of insurance you therefore need to protect against loss of earnings after death. If, after you have allowed for that cover, you can also afford critical illness cover, this would be an advisable route to take as well.
The second thing is slightly more complicated. That is to work out what you would need if you are just protecting your dependents or family in the event of your death or critical illness and they stand to lose your income.
Say for example you earn 20,000 per annum, very few people actually consider what impact death would have on their dependents. If you died your family would no longer have the benefit of your income and they would have to seek alternative means to support themselves. In this case you would need to ensure that this 20,000 is suitably covered.
There are many ways in which this goal can be achieved. You can take out an insurance that pays out a monthly or annual benefit for the amount needed. For example a plan that pays out an annual benefit of 20,000 in the event of death would be suitable for someone trying to protect their family in the event of death and the resulting loss of their salary.
Another way to approach this situation, although it should be said that is slightly more complex, is to enquire about Lump sum death benefit. This policy pays out a one off amount in the event of death. It is now common knowledge that this amount can then be invested to provide an income in lieu of salary. The idea is to take out a policy that yields significantly more than your salary that is, say 25000. The benchmark is around 10 times your income or a lump sum equating to 250000.
If the life assured dies then the beneficiaries would receive a lump sum of 200,000 and in theory they would be able to invest this amount of money to produce an annual benefit of 20,000 per annum and therefore replace the lost income as a result of the death of the breadwinner.
To conclude, it is fair to say that almost all of us need some sort of life insurance cover. By working out how much you need, what the insurance cover will be needed for and deciding how you want the insurance to pay out, the rest becomes simple. Nevertheless, a good life insurance provider will be able to work all of the complicated parts out for you. It is their daily job, and so be sure to make good use of their knowledge and expertise in helping you find the right insurance solution for you.
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