How much cover do I need?
Before you compare life insurance, you need to know there is no one size that fits all. The below will give you some idea of what you should consider when thinking about how much cover you need.
Covering your mortgage
Your mortgage repayment is probably your biggest single current outgoing.
If you’re the main earner in your family, a mortgage is something you’re unlikely to want your loved ones to have to take responsibility for in the event of your death.
So a mortgage life insurance policy, typically know as “decreasing term insurance” could provide just the type of protection you need.
When working out how much cover you need, check that you have sufficient cover against both capital and interest repayments.
Covering other loans
The same goes for any other loans you may have taken out, which are not already covered by some form of insurance. Once again, you may want to ensure that your family is not left with large debts to pay off in the event of your death.
Allowing for childcare expenses
If you have a young family, it’s not just your role as breadwinner that could be missed.
You may want to consider the unpaid responsibilities you currently perform as a parent or guardian, and whether alternative or additional childcare arrangements might need to be made if the worst were to happen.
Just how much life cover is likely to be needed, and for what period of time, will of course depend on how many children you may have, and how old they are.
You may want the peace of mind that your children will be able to continue at the same schools, or be able to complete their university education.
School fees and university expenses could therefore be included in your list of provisions to be made.
If you were no longer there as principal earner, how much money would your dependants need to continue their current lifestyle?
This is the most difficult calculation of all, of course, since it involves taking your current salary into account, and attempting to predict the family’s future needs.
Think about how much time you may need to take off from work to recuperate from serious illness, and the potential additional financial pressures that may bring.
Would you also want to make provision for private medical treatment?
The amount and level of life insurance cover you need will depend on your own personal circumstances, and it’s important to have an idea of the level of cover you need before buying any policy.