The major reason for purchasing life insurance is to guarantee the continued financial support of loved ones who depend on the insured in the event of the insured’s death. You are insuring life itself against the unfortunate truth that unexpected events sometimes occur and you may not have the security to deal with them once they do.
Who needs life insurance?
In a way, we all need life insurance. The majority of people have people some sort of financial obligation, whether this be to dependants or even some unpaid debts, life insure ensures that these are paid off and no one is left picking up the bill in the event that something unfortunate should happen to the insured. If you are fortunate to have amassed a large enough fortune to secure your family in your passing then you may want to weigh up your expenses and make sure you have your financial obligations guaranteed.
You might need life insurance:
- To replace one’s ability to earn income
- To replace one’s ability to care for others
- To pay for expenses arising as a result of death
- To provide for special business needs
- To fund a charitable interest
- To provide a supplemental income later on in life
Estimating the amount of life insurance needed
There are many things to consider when estimating the amount of life insurance cover you may need. A count of you and your family’s general expenses, future plans such as your children’s university fund, the amount of time left on your mortgage repayments etc. If you have any difficulty in working out the amount of cover you need, you may want to check life insurance comparison websites such as comparethemarket.com who provide online life insurance calculators for this very situation.
Factors to take into consideration include:
- The future expected income of the insured
- Existing debts
- Expected future spending, including non-routine costs like university
- Future social security or pension benefits
- Likely costs associated with an individual’s death, such as, estate taxes and funeral expenses
- Any lifestyle changes that might be made by the survivors in the event of the insured’s death
Types of life insurance
It is important to understand the different types of life insurance cover before you make a decision to purchase life insurance for yourself. Policies vary and cover different areas depending on your personal requirements so it is good to shop around and see what policies are on offer.
Types of life insurance include:
- Term Assurance: Term assurance provides cover for a fixed term with the sum assured payable only on death. There are no investment benefits or payments on survival.
- Whole of life assurance: As the name implies, whole of life assurance policies give you protection for life. Unlike term assurance that only pays out if you die during the term of the policy, a whole of life assurance policy always pays out eventually.
- Income Protection Insurance: Income protection policies provide an income that starts after a deferred period of your choice if you are unable to work through sickness or injury. These types of policy usually have a fixed term to retirement age 60 or 65
- Private Medical Insurance: Private medical insurance policies pay for the cost of medical treatment both as an inpatient and outpatient if you want private medical care. The cover may include: consultants’ fees; surgeons’ and anaesthetists’ fees, nursing, private ambulance and room charges.
Choosing the right life insurance
As you now know, there are many factors to consider when choosing the right life insurance for you and there are also a number of options available. Be sure to do your homework before making a purchase, research what each life insurance covers and more importantly understand clearly what type of return you would like to see on your premiums. To find the best deal available you can compare insurance quotes from price comparison sites such as comparethemarket.com and see which one appeals most to your individual requirements.