Your first consideration should be the level of insurance cover you require.
To calculate this you need to work out how much money would be required to pay
off all your debts plus how much income your dependents would need to continue
the same lifestyle. You will also need to take into account the effect of inflation
which is around 2% a year. Don't forget to take into account any lump sums that
will be provided by any other insurances, pensions or investments you have.
As a general guide, for normal term insurance you should consider insuring your
life for between 5 and 10 times your current annual net salary.
If you are using life insurance to cover the repayment of a mortgage only, you will insure your life for the value
currently outstanding on your mortgage. If you have a repayment mortgage you'll need mortgage protection insurance ( which provides cover that decreases in line with you paying off your mortgage). If you have an interest only mortgage you'll need a standard life insurance policy with level cover.
With Family Income Insurance you need to work out how much income your family
will need to live a comfortable life.
Once you have decided on the value of cover you need, you then need to decide
how long you wish to be covered by the insurance (the policy's 'Term').
For Mortgage Protection it's a simple decision as the Term needs to be equal
to the number of years outstanding on your mortgage.
In other circumstances, the Term is a personal decision but you may wish to
bear in mind that the minimum Term is usually 5 years, and the majority of people
select a Term between 10 and 25 years.
The last decision you have to make is whether you would prefer the value of
your policy (the 'sum insured') to be increased automatically in line with inflation.
These are known as 'indexed' policies. Most Insurance Companies will use the
annual increase in the Government's Retail Price Index as the basis for increasing
your sum insured, however this is an optional extra and will cost you more! As
the retail price index rises your monthly premiums will increase too.
Life policies that provide an increasing sum insured in line with indexation
are known as 'Increasing Term Insurance'. Policies that provide a constant sum
insured are known as 'Level Term Insurance'.
Finally, please be aware that you should always read the Key Features Document
for a life insurance policy so that you understand exactly what you will be insured
for and any restrictions that may apply. One of the more common restrictions
is death caused by involvement in a hazardous pursuit.
More Questions:-
|
