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.
So what coverage is required? To offer up an example, insuring a 150,000 mortgage could mean taking out a 150,000 insurance policy. Your dependents will then be responsible for covering the debt in the event of your death.
If you are looking for life insurance to cover your family in the event of your death then what you need to assess is the amount of money that your family would require after you had passed away or what would make them comfortable.
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.
Indexation can also be included in this type of policy. Essentially, the way indexation works is to increase the return on your policy each year in accordance with the average earnings index. In other words, your family will benefit from what your pay rise would have been had you still been alive.
The second option open to you is a lump sum life insurance plan. The difficulty posed with this type of policy is that you have to calculate how much of a lump sum you need to in order to guarantee your predetermined 35,000 payout per annum. This can prove problematic as you cannot predict how your money will be invested, nor can you know how much return it will give in the future. Therefore, with 35,000 being subtracted from an unknown amount every year, you cannot know how long it will last. The widely taken guideline is that you must factor in a minimum of 10 times the required amount, that is to say that 35,000 per annum requires a lump life insurance sum of 350,000.
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.
To sum up the key points when shopping for the policy best for you, get enough cover to adequately meet your needs, it must be for the right length of time, it must cover the sum and be for the timeframe you specify. Internet based companies are a great source of information and answers, so use them well. If in doubt, contact one of them directly by phone and ask for one to one advice
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