Reprinted Articles

Everyone at some point realises that they do need some sort of life cover but very few actually know what type or indeed how much they actually need. This article aims to clear that up and help to ensure that you have the right cover for your financial situation and the right amount of cover for your particular needs.

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 the first thing that you need to think about first and foremost is do you have any mortgages or loans that are currently uninsured? If you do then the need is simple how much is the loan or mortgage amount? Whatever that figure is that is the figure that you need to have insured against death in the first instance and if your budget allows critical illness cover is a must as a secondary requirement.

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.

It pays to consider the type of impact your loss would have on your family financially. Say that at the time of your death you were earning 25000 each year. That would mean that your family would be worse off by that amount each year thereafter. You would need to ensure that you had a policy that would cover this loss in one way or another.

There are several ways to achieve this outcome. The policy can be arranged to pay out either monthly or annually for the amount required. So a policy that pays out 30,000 per annum would be an option for a family that is going to be 30,000 worse off every year in the event of your death and loss of your salary.

An alternative, but more complicated possibility is the option of providing a lump sum payout on the event of your death. Obviously the wise move to make on the payment of a lump sum is to invest it correctly so as to provide a payout on a regular basis. If done sensibly, this can work out well. What you need to do, though, is to take out a lump sum insurance policy for considerably more than the initial income, as stated, 30,000. The standard is 10 times the amount, therefore 300,000. So you will be taking out cover to provide a lump sum of 300,000.

In other words, in the event of your death, the policy would yield an amount of 250000 to your family or dependants which could then be invested by them in order to generate a benefit of 25000 per year, covering the loss of salary incurred by them due to your demise.

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.

Last 5 posts by Chris Clare

• What is Critical illness insurance cover? do I need it? - April 30th, 2008
• From where can you purchase life insurance cover? - April 28th, 2008
• Can good mortgage deals and mortgage advice be found online - April 28th, 2008
• Getting a mortgage in the credit crunch - April 13th, 2008
• Whole of life insurance. Its uses. - April 13th, 2008

Tags: Life Insurance