Eventually all of us come to the realisation that we need life cover, but we don’t always know how much cover to get or what sort. In the next few paragraphs we will attempt to shed some light on the matter. By the end of the article, you should have a better idea of what cover you need to suit your particular financial and personal situation.

To make it simple, if your loved ones are going to be worse off in the event of your death, you need life cover. For example, if there are monthly loan repayments to be met, or if you have a mortgage, or if you are simply the principle earner in your family and if the loss of your monthly income is an issue, you need cover.

So let’s start at the beginning. Do you have a mortgage or loan outstanding and do you have them insured? If you do, and if they are as yet not insured, assess what the amount of that loan or mortgage is. Whatever the value of the mortgage or loan is the amount of insurance you therefore need to protect against loss of earnings after death. If, after you have allowed for that cover, you can also afford critical illness cover, this would be an advisable route to take as well.

The second thing is slightly more complicated. That is to work out what you would need if you are just protecting your dependents or family in the event of your death or critical illness and they stand to lose your income.

It pays to consider the type of impact your loss would have on your family financially. Say that at the time of your death you were earning 25000 each year. That would mean that your family would be worse off by that amount each year thereafter. You would need to ensure that you had a policy that would cover this loss in one way or another.

There are several ways to achieve this outcome. The policy can be arranged to pay out either monthly or annually for the amount required. So a policy that pays out 30,000 per annum would be an option for a family that is going to be 30,000 worse off every year in the event of your death and loss of your salary.

Another way to approach this situation, although it should be said that is slightly more complex, is to enquire about Lump sum death benefit. This policy pays out a one off amount in the event of death. It is now common knowledge that this amount can then be invested to provide an income in lieu of salary. The idea is to take out a policy that yields significantly more than your salary that is, say 25000. The benchmark is around 10 times your income or a lump sum equating to 250000.

If the life assured dies then the beneficiaries would receive a lump sum of 200,000 and in theory they would be able to invest this amount of money to produce an annual benefit of 20,000 per annum and therefore replace the lost income as a result of the death of the breadwinner.

Therefore, to conclude, obtaining life cover is one of the most important decisions you will make concerning your family and its future financial security. But once you know what the cover is for and how much you will need from the policy then the rest of the process should be quite simple. And remember that reputable life insurance companies deal with these policies daily to suit a spectrum of different personal needs. A call to them will be all it will require to obtain the ideal policy tailor made for your situation.