Is it a while since you reviewed your life insurance cover? Have your circumstances changed since you took your policy out? Perhaps you have had children, or maybe you now have a bigger mortgage or school fees to consider? Whatever the reason, ensuring your loved ones are adequately taken care of in the event of your death is paramount.
When calculating how much cover you need, try not to take a ‘finger in the air’ approach. Here are some of the things you need to think about:
- How much debt do you have other than your mortgage? Do you add to your debt each month? Do you pay it down each month? If you have debt, you have to buy more cover to pay it off.
- How much do you spend each month? Look at your bank statements and list all of your regular outgoings, plus allow for a few unexpected extras.
- How much do you save each month? If you put away money every month and live within your means, you may not need to replace all of your income, so you may need less cover.
- What will you need for future expenditure? For example, are you intending to send your children to a private school, or university?
- Think through eventualities. Perhaps you would need to cover extra childcare costs if you’re not around? What would happen to your mortgage repayments if interest rates dramatically increase?
Try and come up with a realistic annual income that you would need to cover these expenses, and for how long. For example, you may decide your family would need £40,000 a year for 20 years. That’s £800,000 of cover. As you will see from the table below, premiums increase the older you are, and the longer you need the cover. So make sure you have fully thought through how much you need, and for how long you will need it.
At PayingTooMuch.com we can provide you with a free and comprehensive life insurance report. We compare a range of the UK’s top life insurers and give you an impartial and unbiased report, ensuring you get the best possible deal. It also helps you choose your optimum term. You can access your personal report online, or give us a call for some extra guidance.
