Most people should have life insurance. If you have any dependents, if you have any loans, or if you simply want to leave a large sum of money to your family when you die then you need life insurance
What is the Best Life Insurance Policy For You - Top 3 Things to Consider?
1. What is the Best Life Insurance Policy for You - Top 3 Things to Consider?
Most people should have life insurance. If you have
any dependents, if you have any loans, or if you simply
want to leave a large sum of money to your family
when you die then you need life insurance. The
question then becomes what type of best life
insurance policy and how much cover do I need?
1. How Much Cover?
The question of how much life insurance cover you
need is quite complicated to work out, but the
principle is simple. Ideally your insured amount should be enough to provide an investment
income that replaces the amount of money that you currently earn without eroding the real
value of the capital invested. Don't forget to include in this calculation any services that you
currently provide for your family that would have to be paid for if you die.
e.g. if you need to provide an annual income of $20,000 for your beneficiaries this would
require an insured sum of $1,000,000 at 2% (average return on investment 5% from interest-
bearing bonds less average inflation of 3% giving a real return of 2% on capital).
2. What is Your Budget for Premiums?
This is really important and you need to be realistic about how much you can really afford.
There is no point being covered against the unfortunate event of your death if you cannot
afford to feed your family because your life insurance premiums are too high.
3. What Type of Life Insurance?
The two main types of life insurance are term insurance and whole life. Term life insurance
covers you for a specific period of time and is cheaper than whole life insurance. Whole life
insurance will (as its name suggests) pay the insured value whenever you die. Your budget for
premiums may force you to choose term life insurance to get the level of cover that you
require. Premiums for this type of insurance are much lower than for whole life insurance. If
you can afford whole life cover then you will need to decide whether the investment aspect of
this type of policy is important to you. Learn more at geoinsurance.com/life-insurance.