4 Things to consider before taking out life insurance
Life insurance is a serious financial commitment which means before you apply for anything, you need to do some research and planning. It’s not something to rush! To help you out, we have put together the top factors you need to consider before taking out life insurance.
How much cover do you need?
Your situation depends on how much cover you need to leave behind, for example, a parent of 3 with a mortgage will need more cover than a single adult who rents a flat. If you aren’t sure what you need to cover, use the DIME method!
D – Debt. Do you have a mortgage, private student loans, car loans, any unpaid credit card loans?
I – Income replacement. Do you have a dependent who will need to replace your income? A partner, a child, a housemate? Also, will you want your cover to replace your income for the rest of their lives or short-term?
M – Mortality. This covers burial wishes and costs, anything to do with your funeral essentially.
E-Education. If you have children, do you want to fund their education expenses? This can range from covering day-care costs to fund their future education.
What will the cost be?
The cost of your cover will depend on different factors such as the amount of cover you pick (also referred to as sum insured), the type of policy, and any add-ons or extras you select. Your insurer will also look at your demographics such as age and state of health. Therefore, if you’re 33 and a non-smoker, you will pay a lot less than someone who is 65 and a regular smoker. It’s good to familiarise yourself with the factors that will affect your cost to see if there are any changes you can make to bring your cost down.
Pick your beneficiary
Your beneficiary is the person or entity who will receive the proceeds from your life insurance cover. You should avoid naming a minor child or your estate – a minor child may not be able to receive funds and your estate can have tax implications. The best way to decide your beneficiary is to keep the purpose of the policy in mind, if it is to cover your spouse and children then your ideal beneficiary would be your partner. You should also plan a back-up beneficiary to cover a situation where your primary beneficiary refuses the funds, can’t be located or is deceased at the time of your death.
Consider Critical Illness
Even if you are in perfect health, life can change quickly, and it is comforting to know you won’t have any extra stress or financial concerns if the worst should happen to you. Critical illness cover is one of the most common add-ons for life insurance policies as it includes cover should you get certain types of cancer, suffer a stroke or any life-threatening illnesses. This will depend on different providers so make sure you do your research. You can take a look at our critical illness policy here.
Life insurance can seem overwhelming and complicated, but it doesn’t need to be! We’re certain that once you consider the above, you will find the rest a lot easier and the process more streamlined.
If you feel like you’re ready to take out your life insurance cover or you have any questions, we can help! Just click here and we will help you out.