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Buying The Right Life Insurance |
By:
Chris Clare |
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Buying The Right Life Insurance
Chris Clare
Buying life insurance can be a bit of a mine field. However hopefully having read this article you should find the whole process that little bit easier and as such be able to find the right product that suits you and your own personal circumstances.
At the outset choosing any financial product can be quite daunting as there are many choices to be made. You will have to take into account the services provided by a wide variety of companies, the return that you get from the product you purchase and indeed which product best suits your circumstances. The beauty of life insurance is that only two factors need be considered: the amount that you require and the timespan of that requirement. Once these are taken into account then it is simply a matter of choosing a company that suits your budget.
The amount you will need depends on what you require covered. If, for example, it is a mortgage worth 120,000 then you will require 120,000 in cover so that in the event of your death your dependants will be able to settle the mortgage.
It becomes a little more complex if you are looking for family protection that is life insurance just to protect your family. When you need this type of protection the best way to go about it is to establish the amount you family would be worse off in the event of your death.
The best way to assess this is to take into account your annual income. Lets say that you annual income is 30,000. In the event of your death your family would therefore be 30,000 worse off. So what would be required would be 30,000 cover per annum.
This can be done one of two ways. The first way is you could take out life insurance cover called family income benefit. This type of life insurance is designed to pay out a set amount of money every year for a set amount of time. Say for example 25,000 on a 25 year term this would obviously pay out 25,000 every year for the balance of the 25 years after you die.
With this type of cover you can also include something called indexation. Indexation basically will increase the amount of benefit each year inline with the average earnings index as such your dependents will essentially get a pay rise each year same as you would had you been alive and continued to work.
The second approach is to take out a lump sum life insurance plan. How this policy works is that you need to work out how much of a lump sum is required to cover your 30,000 per annum deficit. This can be quite problematic as you have to take into account factors such as how the money would be invested, what the return would be on that investment, and how long the lump sum would last if 30,000 were to be taken out per year. The basic rule of thumb in this instance is to take your yearly income and multiply it by 10. Therefore a yearly income of 30,000 would require a lump sum payment of 300,000.
All this said were a requirement such as a set amount of money per annum is there you should always strongly consider family income benefit because, as stated earlier it is designed to do one thing and that is to pay out an amount of money each year and to include a pay rise each year. This type of cover will always take out the uncertainty of investments and it is far better to know that your dependents are getting the right amount of money into the future.
So in summary cover needs to be sufficient to meet the needs that you have laid down and it needs to be for the right amount of time that is right sum assured and the right term. A lot of internet based web sites have loads of information designed to make this whole process easier so don't forget do your research and if you are still unsure ring them and ask to speak to one of their advisers.
Get what you need from your http://www.life-ins.co.uk) life cover plan try Life-ins.co.uk for free online low cost quotes for http://www.life-ins.co.uk) life insurance cover
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Article Source: http://www.statssheet.com/articles/article67089.html |
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