Can You Know How much life insurance you need!

Deciding to buy life insurance is one thing. Deciding how much cover you need is quite another.

The most common motive for buying life insurance is to make sure that your loved ones will be financially secure if you're not around, but it can be all too easy to underestimate exactly how much cover is enough.

So now we've made the process a whole lot easier with our nifty new calculator, which helps you work out how much is right for you

Don't just protect your mortgage

When taking out life cover, many people simply opt to choose a sum equivalent to their mortgage.

But while your mortgage is likely to be your biggest monthly outgoing, there are lots of other bills that will need to be paid if you're not around.

So as well as insuring the amount you still have outstanding on your mortgage, think about all your other expenses too. These include credit card debts, personal loans, and any car finance schemes you might be paying for.

Look at all your other outgoings too - what sort of lump sum would your family need to cover not only immediate expenses following your death, such as your funeral, but also longer term costs, such as council tax and energy bills.

Providing for your dependents

If you've got children, you should think carefully how much they need, every year until they can stand on their own two feet financially.

If you're paying school fees, for example, you'll need to be certain these are covered if you die.

Even if you're not working, but are bringing up your children, life cover is still important, as whoever is left looking after your children in the event of your death may not be able to stay at home to care for them.

That means you'll need to think about how much it would cost to replace the childcare you were providing.

If you're hoping your children will eventually go to university, then you might also want to include tuition fees and their accommodation costs in your sum insured.

The more life insurance you opt for, the higher your premiums will but. But it's essential not to skimp cover if you can afford the premiums.

If you do, your loved ones could be left high and dry financially after your death.

Check existing cover

Before buying life insurance, always check whether you've already got cover in place, as you don't want to pay for cover twice.

Find out from your employer what sort of pay out your dependents might get in the event of your death.

Employers often provide 'death-in-service' benefits that can be up to four or five times your salary, which would reduce the amount of life cover you needed to take out.

Which type of cover?

There are different types of life insurance, so you'll need to think carefully which sort of policy is right for you.

There are two main types:

• term insurance is the cheapest and most popular kind of cover. It will pay out a lump sum if you die within a set period of time, such as the number of years left on your repayment mortgage. People looking to protect their dependents plump for term cover.
• whole-of-life insurance offers protection for your lifetime, and therefore premiums are much steeper than they are for term cover (because you're guaranteed to die at some point). This is primarily a tax-planning and investment product.

You can bolster your protection portfolio further with critical illness insurance, which is often bought alongside term cover.

Critical illness insurance pays out a lump sum on diagnosis of one of a list of lengthy illnesses such as cancer and heart disease.

Joint cover for couples

If you are married or have shared financial commitments with someone else, you might want to think about taking out a joint life policy rather than two single policies. 

Bear in mind that although this will mean cheaper premiums than having two separate plans, there is only one pay-out when one of the policyholders dies, and the policy then ends.



source:
http://www.moneysupermarket.com/c/news/well-help-you-work-out-how-much-life-insurance-you-need/0057087/