Generally speaking you should insure to provide a lump sum big enough to remove the burden of any debts and, ideally, have enough left over to invest to provide an income to support your dependants for a time.
The first consideration is to clarify what you want the life insurance to protect. If you simply want to cover your mortgage then an amount equal to the outstanding mortgage debt can achieve that.
However, if you want to prevent your family from being financially disadvantaged by your death and provide enough cash to support their current lifestyle, then there are a few more variables to consider.
- What are your family expenses and how would they change if you died?
- How much would outgoings increase on things like childcare if you were to die?
- How much would the family income drop if you were to die?
- How much cover do you get from your employer or company pension scheme and for how long?
- What insurance policies do you have already and how far do they go to meeting your needs?
- How far will your savings go?
- What state benefits are there that could give extra support to meet your family´s needs?
- How would inflation affect the amount of your cover over time?
The amount of life insurance you choose really is up to you and will depend upon your personal situation. The main point to remember is that any amount of financial protection is better than none. However, if you are in doubt what is right for your needs, consult an independent financial adviser who can give you specific advice. You can find a database of IFA's in your area at www.unbiased.co.uk.
PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular life insurance policy or provider. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at www.unbiased.co.uk
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