As you’ll know, Life Insurance is designed to pay a lump sum on the death of the insured person. The purpose, of course, is to allow your loved ones to maintain their lifestyle once you’re no longer there to support them.
In the end, to avoid being over or under-insured, your decision needs to weigh up the premium cost versus what is really necessary. So how much would your family need? Here are some key tips to get you started.
Consider your priority needs
When estimating what level of cover you need, it’s important to keep your financial circumstances front and centre. For example:
- Do you have any debt? Usually paying off debt is the priority, as this can relieve a lot of financial stress on the family.
- Would your family be able to cover funeral costs? Remember: funerals can be a costly business, and not having enough funds can add to an already stressful time.
- Do you have young kids? If the remaining partner intends to keep working, you may need someone to help clean the house or care for your kids, while the family settles into a new routine.
Think about your income
Working out how much cover you need? A good way to start is to think about your income: what is it paying for, and how would your family cope without it? For example, if you currently earn $60,000 per year and have a mortgage for $400,000, you may not need a million-dollar policy.
But of course, this is just one of the criteria to estimate your Life Insurance needs. If you’d like to discuss your options in detail, don’t hesitate to contact us.
Weighing up all factors
When running the numbers, think about different scenarios, without automatically assuming that the surviving spouse will either continue working or will return to work. The grieving process is an unknown, and they may need more time off than you have planned, or may not want to return to the same work.
As always, don’t forget we’re in your corner and can help you find the right level of coverage for your family’s needs.
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