Usually when you purchase a type of insurance, your intention is to protect yourself financially in the future. Car insurance will help you if you ever have a roadside accident and your vehicle gets damaged, and health insurance will make sure you don’t have to shell out the big bucks for any medical emergencies or hospital fees. Meanwhile, home and contents insurance will reimburse you for stolen possessions or destruction of property. However, there is one kind of cover that people purchase not to benefit themselves, but to assist with the comfort and security of their loved ones: life insurance.
While life insurance is a popular form of protection for parents who are looking out for the best interests of their child(ren), people who are married with no children and even long-term couples should consider the many benefits of life insurance for their spouse’s sake. While it can be difficult to envision serious injuries or illnesses befalling someone that you love, the unfortunate truth is that in life, there are no guarantees. As Benjamin Franklin eloquently remarked, “Nothing in this world can be said to be certain, except death and taxes.” No-one likes to imagine the worst case scenario, but being prepared for every eventuality will undoubtedly save your family a great deal of pain and suffering in the long run.
The Importance of Life Cover
There are several different types of life insurance, and each one is suited to different lifestyles and circumstances. Did you know that not all types of life insurance provide cover for your loved ones after your death? There are certain varieties of cover that are simply intended to help you maintain your income, if you were to sustain a serious injury or fall very ill. Trauma cover, for example, provides a lump sum while you are still alive, if you are diagnosed with a specific illness or injury and are therefore unable to work.
Life cover is the one type of life insurance which will offer financial support for your family, once you have passed away. Also known as term life insurance or death cover, life cover pays a set amount of money once you (the insured person) have passed away. This money will go to the people who you nominate as beneficiaries, which may be your spouse, your children, and/or other close family members.
Selecting the right kind of life cover is an important decision that requires a great deal of careful thought and consideration. Choosing your beneficiaries is the first port of call, and you may already have a few of your loved ones in mind – many people already do when they decide to invest in life cover, as these individuals are often the main reason prompting you to take this step.
After you have your beneficiaries in mind, it’s time to get down to the nitty gritty details and figure out exactly how much cover you want. Although every person’s familial and financial situation will be different, there are several details that you’ll always want to take into account, such as your spouse’s income and the age(s) of your child(ren). This will help you to work out exactly what you want your life insurance policy to cover, and for how long. At this point, it’s a good idea to discuss your options with your family, and to be practical about how much financial aid your spouse and/or your children may need in the future when you are no longer around.
Working It All Out
Choosing the right life insurance policy can be intimidating and downright scary. The important thing is to start with the basics and work your way up from there. Once you have an idea of the ballpark figure for your cover, you can begin comparing policies and asking insurers for the more minute details. Unsure where to start? Check out our starter tips, which will set you in the right direction. While every family and relationship is different, there are a few general matters you’ll definitely want to think about.
The intention of life cover is to offer financial support for your family, and often this takes the form of substituting for your income. Therefore, a practical approach to work out how much cover you should apply for is to calculate your annual income over a certain amount of years. This amount of time will vary from person to person, but ostensibly you will want enough cover to ensure your family is able to live comfortably until your children have left for university and/or are able to support themselves.
2. Expenses and Other Debts
For ultimate peace of mind, you may also want to figure out the total expenses your family will require over a certain amount of years, alongside calculating the sum of your salary for this same period of time. Knowing both these figures beforehand will allow you to level out any disparities and ensure you can make an informed decision when it comes to choosing your cover. When it comes to life insurance, many people slightly overestimate their needs rather than risking their family’s safety, comfort and security!
Significant costs to take into account may include your mortgage payments, childcare costs, daily living expenses and regular bills, your children’s present and future education (especially if they are or will be attending private schooling instituions), and even family holidays.
3. Funeral Costs
A more immediate expense you may not have considered is the cost of your own funeral. While it can be difficult coming to terms with this eventuality, the reality is that funerals can now be very pricey affairs that require a great deal of preparation and organisation, as well demanding a huge financial cost. If you’re worried about how your family will cope financially with this event, it’s a good idea to investigate and calculate the costs of your funeral proceedings and tally this amount in with your family’s other expenses. Consider the costs of the venue, funeral director, burial/cremation, transport, death certificate, permits, and even smaller details such as the flowers and newspaper listing. All the bits and pieces do tend to add up, so be as scrupulous as possible!
4. Double Act
It’s a common misconception that only the highest income earner in a household needs to invest in life insurance. In actuality, if you and your spouse have children, it’s quite important for both of you to consider life cover, even if one partner only works part-time or is a stay-at-home parent. Imagine what would happen if one of you passed away – would the person who survived still be able to support the children, financially and otherwise, on their own? The partner who earns less still contributes to the household, either through their income or by looking after the family’s welfare. If you decide to invest in life cover, this may be a good opportunity for your spouse to also consider the idea, and vice versa – regardless of which one of you earns the highest income.
Looking Out For Your Loved Ones
We’ve briefly outlined the basics, and now it’s time for you to take matters into your own hands! As you can see, there are countless ways in which having life cover, as well as other types of life insurance, is beneficial not just for your family and your loved ones, but for your own peace of mind. Knowing that the people you care about the most will be happy and healthy, thanks to your own forethought, will undoubtedly enable you to truly enjoy your life with your spouse and your children. While you can cross your fingers that nothing unfortunate unexpectedly happens, having all your bases covered with life insurance is the best safety net you can hope for.