Most people are familiar with different types of insurance cover, such as car insurance, home contents insurance and buildings insurance.
A life insurance policy will give you the cover to offer solid financial protection to your family when you die.
Before you get life insurance, you need to know why you want to be covered. For instance, do you want to leave a legacy? Or do you want to make sure that funeral costs are covered or do you want to make sure that you children’s education costs are covered?
Life insurance comes in two main forms:
Term life insurance
This is a policy that lasts for a fixed period of time. If you live longer than the policy term, there is no pay-out. This type of insurance is often cheaper, and more people sign up for it as a result.
Whole life insurance
This policy is designed to last as long as you do. When you die, the policy pays out a lump sum to your beneficiaries. You are required to pay a monthly premium.
With life insurance, the more protection your policy offers, the higher your premiums.
If you want to have a life insurance policy in order to provide your family with a regular income, you should calculate your current expenditure and consider the effects of inflation.
What affects life insurance premiums?
- The actual sum that is insured
- Your age
- Your health
- How much you drink or smoke
Keep in mind that the higher the risk, the higher the premium.
The amount of cover you need will depend on:
- Your take-home pay – It depends on how much you earn after taxes. You need to be able to afford your premiums on a monthly basis.
- Debts – you need to consider how much money you owe to various creditors. The life insurance you get should be enough to cover these debts in the event of your death once you get your pay-out.
- Mortgage or rent
- The number of dependents you have – the life insurance amount you get should be enough to sustain your family.