When valuing your life it's about taking into account how any mortgage repayments or bills would be paid; in short, how your family would be supported when you die.
Your status in life is constantly changing - you may have recently bought a house, got married, had children, or become self-employed. Each of these developments change the demands on your income and create a new level of responsibility to your dependants - which they may have to bear without you if you die.
How do you value your life?
There are a number of factors to consider when trying to calculate the financial value of your life and therefore the level of cover you need from a life insurance policy to protect your family.
Dependants: Do you have a wife, children, a partner or elderly parents? Each would require your financial support. Think about what capital sum would be required for them to maintain the lifestyle they are accustomed to with you around. Remember to include the potential costs of childcare and the costs of inflation.
Debts: Any outstanding mortgage repayments, medical bills, credit cards, loans or other debts will have to be paid off even if you die. A life insurance policy can provide immediate cash and the proceeds can be used to pay off debts rather than depleting your capital assets or forcing their sale.
Trusts: Consider getting your life insurance policy written "in trust". Otherwise, in the case of divorced families, the proceeds could go to the "wrong" dependants or you could lose 40% in inheritance tax. Placing a policy in trust is simple and is usually a free service.
Remember also that once you have invested in life insurance cover you should review it regularly. Any changes to your personal circumstances or your health or your financial matters are likely to affect the level of cover you require.
Top Life Insurance Tips:
1. If you decide to replace existing cover, make sure the new policy is up and running before you cancel the old plan.
2. Think carefully about the term of the cover which might be up to your intended retirement or until your children stop being dependent. This could be when they are 18, 21 or even later depending on education plans and early career success.
3. If you have any health or lifestyle risks, for example existing medical conditions or an adverse family medical history, you will need a specialist insurance broker to help you find the most suitable insurer for your individual risk profile.
4. If you can give up smoking and any tobacco use for 12 months, most insurance companies will class you as a non-smoker. This one lifestyle change could save you up to 30% on premiums.
5. Consider getting your life insurance policy written "in trust".
