When it comes to choosing life insurance, the different choices can be overwhelming and it can be difficult to know which policy is best suited to your needs. Once you have decided on the type of life insurance cover, there are more considerations to be made before you sign off on a policy.
It is important to understand how much life insurance cover you need; in other words, how big you need the lump sum to be when the policy pays out and what you can afford to pay in monthly insurance premiums. The amount of cover can depend on your circumstances, and the type of protection you are looking for.
If you are hoping to get the right life insurance cover for you and your family, this helpful guide should shed some light on what aspects to think about.
Understanding how much life insurance cover you need
When you begin to compare life insurance, you need to consider the needs of your family and any dependents that you have. There is no one-size-fits-all solution when it comes to cover, as everyone’s situation is different.
For example, everyone has different incomes, with different bills, mortgage payments and standards of living. This will affect how much life insurance cover you will need to take out.
With that in mind, here are some of the main things you need to consider in regard to the amount of life insurance cover.
Covering your mortgage
Your mortgage repayment is likely going to be your biggest outgoing. Due to that, this can be one of the biggest financial burdens on your family if you were to pass away.
If you are the main earner in your family, and your loved ones would struggle with the mortgage repayments in your absence, mortgage life insurance could provide the right type of cover for you.
You need to make sure you have sufficient cover against both capital and interest repayments. Many mortgage lenders will try to sell life insurance when you take out a mortgage, but you do not have to buy it from them.
Covering childcare expenses
If you have a young family, this should be an important consideration when choosing how much life insurance cover you need. After all, you are responsible for your children and whether they are financially taken care of.
If your spouse does not earn as much as you, this should also come into your decision process.
You should think about how many children you have and how old they are. Will they require school or university tuition in the future? Do they need financial help until they are old enough to fend for themselves? This can help you decide on the amount of cover you need to take out.
Covering other loans or bills
If you have any other loans that are not already covered by some form of insurance, or other household bills to spend, consider how much cover you need to ensure your family are not left with large debts.
Your circumstances in regard to loans and bills could be helped with a number of different types of life insurance. Make sure you understand the different types available to you to ensure you are making the right choice for you and your family.
The information in this article is for educational purposes only and is not to be taken as financial advice. To get advice on Life Insurance please consult your Life Insurance Broker.