Life Insurance

How much is your life worth?

Anyone who has dependents should consider this question and the need to safeguard your loved ones financially against an uncertain future. Anyone purchasing a life policy will have to consider this question. In terms of hard cash the answer is pretty easy to assess.

Assessing the Right Amount of Life Insurance Coverage

How can you determine the right insurance coverage for your family? Start by determining what your objectives are for purchasing a life policy. If you are just beginning a family, or if you've got young kids, you may want to consider the kind of financial needs they would experience if you were not there to provide for them. If you are in the more mature stage of your life, other factors may drive you to need life insurance coverage. Some factors you might want to consider are:

• Mortgage
• Loans/Debts
• School fees for your children
• Financial support to sustain your family multiplied by the number of years you think they might need this kind of financial support after your demise
• Inheritance Tax
• Funeral expenses
• Financial support for an aged surviving spouse
• Protect your spouse's retirement funds

Considering such factors will help you determine the amount of life coverage your family would need. Make use of our life insurance calculator below which can help you assess an accurate coverage incorporating inflation and interest rates into your calculations.

The rule of thumb for assessing life coverage is usually calculated by multiplying your annual income by five to ten times, depending on your family's needs.

Assessing the Right Amount of Premiums

Now consider your earnings. After deducting all your expenses consider the amount of premium you would be comfortable paying.

Such an exercise will quickly help you determine which type of life insurance policy you can afford at this stage in your life.

Choosing the Right Policy

Whole of Life Policy

If you can afford to purchase a whole life policy, and anticipate needing life coverage your entire life, there are many types of permanent life insurance policies to choose from. Some of them offer you the opportunity for investments in such a way that the interest accrued pays for future premium payments. Flexible Whole of Life Policies can help you do this. Generally, premiums for a flexible whole of life policy remain stable throughout your life and accrue cash value over the years. You can withdraw cash from this type of policy, as needs arise.

Term Insurance

Generally, the purest and cheapest form of life insurance is a term insurance policy. You may select a term for a minimum of 1 year with a maximum generally to age of 65.

Some companies charge for the life cover on an age related basis. The premium increases each year. Others charge a fixed premium averaged over the term. An increasing premium is very cost effective in the early years whereas the fixed premium, depending on the term, will be higher.