| Life insurance
I don’t know about you but
I don’t exactly like to think about death. I’m
still relatively young and suppose I’m not that conscious
of my own mortality. However I’m all too aware that
if something did happen to me, my wife and two children would
be left in serious financial difficulty. I’m sure the
government try their best, but the support they offer is barely
enough for one person never mind a family. So I now have yet
another direct debit that makes sure my family will be cared
for if I'm visited by the Grim Reaper.
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Life
Direct |
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Its worth noting that the only reason I need life insurance
is because people are dependent on me. My younger brother
would be wasting his money if me had life insurance because
he is still single and has no children. His money is far better
spent on a decent heath insurance policy that looks after
him if he should become sick or unable to work.
Life insurance should cover your debts and make
sure there is enough left over in order to live a comfortable
lifestyle. The cost of your life insurance premium is based
on the ‘sum assured’, your age, your sex, your
medical history and whether you smoke.
Life insurance policies can fall into two main
types of cover;
- Term assurance. This is ideal if you're on
a tight budget as it’s cheap and simple. It will pay
out a fixed amount of money (the 'sum assured') if you die
within the specified ‘term’ or period (20 years,
for example). However if you manage to avoid death during
that time you’ll receive nothing. Most policies will
cover a time period that allows your children to grow up
and or your mortgage to be paid off.
- Whole-of-life insurance. This is far more
expensive because it covers you until your death. And when
the time does come and your dependants know they will receive
a payout. The majority of plans will also include a 'with-profits'
clause, meaning your dependants also get a percentage of
any profits the insurance company makes. These policies
are a good way to leave a windfall for loved ones and can
also be cashed in at any time, but casing it in will lose
the life cover.
So, how much life insurance do you need?
Well, most the insurance companies will try and persuade you
to take out about 15 times your annual income. So someone
earning £30,000 a year would end up with £450,000
life insurance cover. That figure almost turns your death
into a lottery win and I’m not sure it would leave me
able to trust my wife with the gardener. So I wouldn’t
bother with their calculations, just work out how much your
own family actually needs.
Take your yearly cost of living plus however much extra you
think they’ll need and multiple it by the total number
of years you think your family will need your support.
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