Life insurance

You may be thinking ' who needs life insurance? ' Simply, if you have a family who is financially dependent on you and/or have debts that are serviced from your income alone, you should consider the peace of mind life insurance may bring. Obviously, the greater your financial obligations and the more dependants you have, the more life insurance you may need to protect your assets and your family's financial security.

Life is full of uncertainty and often the unexpected can occur. The death of a loved one can place an enormous strain on a family both emotionally and financially. Have you considered how your family would cope financially, if your no longer around? Choosing a life insurance product is an important decision, but it can be complicated. As with any major purchase, it is important that you understand your needs and the options available to you.

Why do I need life insurance? The main purpose of life insurance is to provide cash to your family after you die. The money your dependents will receive (the "death benefit") is an important financial resource: It can help pay the mortgage, run the household, end ensure that your dependents aren't burdened with debt. The proceeds from a life insurance policy could mean that they won't have to sell assets to pay outstanding bills or taxes. What's more, there is no federal income tax on life insurance benefits.

Where do I Begin? Start by evaluating your family's needs. Gather all your personal financial information and estimate what your family will need after you're gone. Include ongoing expenses (such as day care, tuition or retirement) and immediate expenses at the time of death (like medical bills, burial costs, and estate taxes). Your family also may need funds to help them readjust... perhaps to finance a move, or pay expenses while job hunting. Remember, life insurance provides financial protection. If protection is not your primary goal, you should consider other financial products.

How much life insurance will I need to purchase? While there's no substitute for evaluating needs, one rule of thumb is to buy life insurance equal to five to seven times your annual gross income. The policies are generally renewable each year, meaning that the premium is calculated each year and will normally increase, as you get older. This form of insurance is rather flexible in that the sum insured can be altered to suit your financial circumstances without incurring any financial loss. When the benefit becomes payable, it is normally paid to your dependents or your estate. This lump sum could be used to pay back debts and/or provide a lump sum that can be drawn upon to create income, and so help your family maintain their current lifestyle. In addition, it will help you keep your families plans on track and pass on an investment asset to your family.

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