Life insurance Ė getting it right
- By: Michael Challiner
One of the most tragic disasters that can happen to a family is the death of a parent. From an emotional point of view it is devastating, but if that person is the one the family depend upon for their financial well-being it can be a financial disaster too. If your family would suffer financially if this happened, you should think about life insurance.
To help you to assess your needs, think about the value of everything you own. There will probably be your home and full contents. Include such things as cars, caravans, boats and holiday homes. Donít forget all your personal items, such as jewellery, collections of coins, stamps or similar. Remember items that have been passed down to you. Then there may be PEPís, ISAís, pension plans and the like. Include any life assurance which you may have tied in with your employment. All have a value and all add up to the value of your current assets.
Next, you need to think about your current liabilities. These are typically your mortgage, loans and current commitments.
Whilst itís true that your family would normally inherit all the assets, you need to get a clear idea of their true worth in order to ascertain just how much insurance youíd need to provide a reasonable standard of living for the family.
You could then look at the likely earning power of the family. Would your partner be able to work, or maybe they contribute already? If so, could this continue with a family to care for? Are there any other sources of income for the family, such as buy to let, pension plans etc?
Youíre then in a position to work out what their expected costs of living would be. If you donít take out enough insurance, they wonít be able to cope. If you over-estimate their needs and donít take account of the current position, then you could over-stretch yourself financially. Itís important to work out the right balance.
Term insurance provides protection for your family for a specific period of time. Itís a simple way, for example, to provide cover for the period that your children will still depend on you. You will be covered for a specified amount from the time you take out the policy until the end date of the policy. If your death occurs in this time, the family will receive a lump sum payment. There is no cash value to the policy and once the due date is passed it simply ends.
It is likely at this time that your circumstances will have changed and your insurance needs will be very different. This will be the time to re-assess your position. If you still have people who depend to you, donít leave your self uninsured.
Decreasing term insurance is another product which you might consider. It is designed for those whose insurance needs are likely to become less with time. The monthly premiums will remain constant but the payout will decrease over the insurance term. This type of cover is normally cheaper as the potential payout will be less as time goes on.
There are various types of life insurance. The main thing is to make absolutely certain that you have the right level of cover, for the sake of your family.
The easiest and most simple way to find out whatís available is to get on-line. An on-line broker will be up to date with whatís on offer and will be able to offer you a range of quotes at the right price. Find out just whatís right for you and your family.
Too little life insurance and your family will struggle. Too much and you may find it difficult to make the payments. Get the right balance.
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