Life insurance is something you’d probably rather not have to think about, but it’s important to ensure that your loved ones will be looked after should anything happen to you. If you have a family dependent on your income, and you don’t have much saved up in the bank, it’s especially important to take out life insurance. But deciding that you need life insurance cover is the easy bit; what’s not so straightforward is working out what level of cover you’ll need, and how much cover you can afford.
You may have heard that you need to be covered to a level of 10 times your annual salary, but in reality you may need substantially more than this if you have a big family to support or an expensive lifestyle. The problem with trying to simplify it like this is that there are no hard-and-fast rules, because everyone’s circumstances are different. The best way to ensure you have adequate cover is, therefore, to calculate your monthly expenditure, along with longer-term expenses and any debts you have. These are the costs your family would have to bear without you, and could include:
- Outstanding debts, including your mortgage
- Cost of childcare, school and university fees
- Monthly household bills and living expenses
- Savings for retirement
The level of cover you need will depend to an extent on whether or not you are the primary breadwinner for your household and how many dependents you have. Would your family be able to afford to pay the mortgage and bills without your income? Even if you’re a stay-at-home parent, you may still want to consider taking out life insurance, because your partner would need to pay for childcare if you were no longer there to take care of the children during working hours.
If you take out mortgage protection life insurance, this would run for the remainder of your mortgage and will pay it off in one go should the worst happen to you. The level of cover typically diminishes with time as the outstanding debt goes down. You might also want to consider critical illness cover to help your family should you become seriously ill and unable to work.
Finally, remember that circumstances change, so once you’ve taken out life insurance you’ll need to check your policy from time to time to ensure that it would still provide adequate cover.
If you have any questions regarding life or health insurance, please call our specialist team on 0800 172 172 or request a quote