Learning about life insurance can sometimes seem like a daunting task. But after you read a few tips that will help you understand this important type of insurance you’ll see that it is simple to understand. You need to find out how much cover you need and how much it will cost. It’s a very important purchase so you need to be sure that you purchase the right package for you.
1. Those that have dependents need Life Insurance
For people that have children or others that depends on their earnings, life insurance is a must. The main aim of life insurance is to protect your income. In simple terms, life insurance will help your dependents to keep on living the same way they do now if you’re not there in the future.
2. It helps to replace your income
Life insurance will take your salary, include any normal raises that over time you would get, adds the value of employee benefits (healthcare etc). It then subtracts taxes and what it costs for you to be part of your family. What’s left is what you family is entitled to. A good way to work out the amount of insurance you need to buy is to follow this simple equation; 60% of your annual income x years left until retirement.
3. Some is better than none
Having some sort of life insurance is much better than having no life insurance at all. You should at least have insurance that will cover your debts and 5 years of your current annual salary.
4. It’s not as expensive as you might think
It is commonly thought that life insurance is very expensive. You can usually get life insurance at a very good price, it does of course increase in price the older you are. It is a smart financial move to buy as much insurance as you need when you’re relatively young and healthy. Another good tool to help you work out your life insurance is a life insurance calculator – you’ll be able to find these online.
5. It makes financial sense to have life insurance
The fact that life insurance will usually cost your roughly 1% of your annual income means that it makes perfect sense to buy it. For 1% of your annual salary you will protect years of future earnings if anything were to happen to you. It makes sense to buy it for the good of your family and dependents – it’s better to be safe than sorry!
6. Understand you needs
You should sit down and consider what exactly is it you need. You know your financial situation better that any advisor ever will, so before you talk to anyone sit down and figure out what is right for you.