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Effective Use Of Life Cover |
By:
Chris Clare |
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Effective Use Of Life Cover
Chris Clare
Eventually all of us come to the realisation that we need life cover, but we don't always know how much cover to get or what sort. In the next few paragraphs we will attempt to shed some light on the matter. By the end of the article, you should have a better idea of what cover you need to suit your particular financial and personal situation.
In short anyone that leaves someone worse off in the event that they die needs some sort of life cover. This could be if they have a mortgage or loan or could just be if they are the major bread winner in the home and the loss of them would mean the loss of their corresponding income.
So the first thing that you need to think about first and foremost is do you have any mortgages or loans that are currently uninsured? If you do then the need is simple how much is the loan or mortgage amount? Whatever that figure is that is the figure that you need to have insured against death in the first instance and if your budget allows critical illness cover is a must as a secondary requirement.
The second thing is slightly more complicated. That is to work out what you would need if you are just protecting your dependents or family in the event of your death or critical illness and they stand to lose your income.
It can be uncomfortable to consider the financial impact our death can have on our family, but it can be easily simplified. Let's say that you earn 30,000 per annum. If you die, your family is therefore going to be 30,000 worse off every year and will need alternative methods to provide this amount of money. So you will need to provide cover for this in the event of your death.
There are myriad ways for going about this. One way is to take out the sort of policy that pays out either a monthly or an annual amount to cover the amount needed. This policy would therefore pay an annual amount of 25000 to protect your family against the loss of your earnings if you died.
Another alternative solution to providing an income on death, but at this point it has to said is a complicated solution, is to provide a lump sum death benefit. Most people are aware that if they are given a lump sum they can in turn invest that sum of money to provide an income. It is this knowledge that makes this solution work quite well. What you do is take out a lump sum life insurance for significantly more that the required amount, in this case 20,000. Significantly more than this would be considered 10 times which would give a benefit amount of 200,000.
If the life assured dies then the beneficiaries would receive a lump sum of 200,000 and in theory they would be able to invest this amount of money to produce an annual benefit of 20,000 per annum and therefore replace the lost income as a result of the death of the breadwinner.
So in summary virtually all people need life cover of some sort all you need to do is work out for what exactly you need it for and how much and the solution almost works itself out. That said you will find that good providers of life cover are very capable of working all this out for you and as this is generally something that they do every day there competence is of a high standard in getting the solution both right and affordable for you the client.
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Article Source: http://www.statssheet.com/articles/article70891.html |
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