How Much Life Insurance Cover Do You Need?
Not
having enough life cover is just as dangerous as having no life
insurance at all.
Failing to take out enough life cover can render your efforts to
secure and protect your dependants'
financial future fruitless.
Think about it.
There is no point taking out a life insurance policy
and paying for it every month if, after you are no longer around,
there isn't going to be enough money to pay for your children's
education, the mortgage on your home or the debt that you have
incurred for that matter.
After all, the whole purpose of having life insurance is to ensure
that your family's future financial needs are adequately provided
for and that they will be able to maintain their current standard of
living should you die or if you are no longer able to earn an
income.
So how much life cover do you actually need?
The amount of life cover needed differs from person to
person and will be influenced by a variety of factors.
These include
your age, whether you are married or not, if you have children, how
many children you have, your outstanding debts and your current
income.
Potential tax commitments including estate duty, capital
gains tax, outstanding income tax, as well as other costs such as
funeral costs also need to be accounted for when determining how
much life cover is required.
At
the very least, the cover you take must provide enough to replace
the income you are now contributing to the family, as well as pay
for any outstanding debts you might have so that you don't leave
your dependants with that liability.
It
is usual for one to take out a life policy for between six and 20
times his/her annual salary.
The policy should also take into
account any outstanding debts, home loans and vehicle finance etc.
Inflation also needs to be considered when determining the amount of
cover you need.
The cost of living goes up every year and while
R1-million might be enough to support your family now, it might not
be enough in ten or 15 years time.
The amount of cover you can take will also be affected by
how much you can afford to pay on premiums each month.
Premiums are
determined on age, state of health, lifestyle, hereditary factors
and a host of other factors into consideration.
A
healthy young person who doesn't smoke or engage in hazardous sports
like sky-diving is going to pay less each month for the same amount
of cover than someone of the same age who does.
In general, premiums
go up with age so a 40 year old is going to be paying more than
someone in their twenties.
Complete the following form for a quote on life insurance:
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