Life Insurance

Why is life insurance important and how do you determine if you need it or how much to purchase. The answer to these questions will take a little research on your part but will be worth the effort. If you are a homeowner with a family you will want to make sure you have life insurance. The reason behind this statement is very simple, should something happen to you as the main supporter of your family, life insurance will provide protection for them.

The coverage most people decide on is called term assurance. The policyholder would assign a beneficiary and in the event of the policyholder’s death, the protection would be paid in a lump sum. Typically the family would receive the payment for their expenses, providing a level of comfort for them. Another provision would be to use the funds to pay down a mortgage this is particularly helpful if you have an interest only mortgage. This is a mortgage where you don’t pay on the principal, which means you don’t reduce the debt.

Because term assurance is most commonly used for interest only mortgages there is another type of coverage for the protection of a fixed rate mortgage. This is called mortgage protection or sometimes Decreasing Term Assurance. The most obvious difference is that the coverage decreases as the mortgage decreases. You can also add on a Critical Illness Benefit to some policies. While the coverage varies for this type it generally pays out death benefits or serious illnesses. Heart attacks, cancer and other debilitating illnesses are often part of this coverage. It is important for you examine your policy carefully to see exactly what is covered.

The price of life insurance will vary and there are many deciding factors that insurance companies take into account. The age that you are when you take out the policy, if you are a smoker or have been a smoker. If you are a smoker how long have you smoked? The health that you are in now, the history of your immediate family and whether there have been any lengthy illnesses. If you are male or female and mortality rates will be looked into when determining premiums.

Now that you know the various types of life insurance and how the fees are calculated you must decide how much protection you will need. If you are the main source of income for your family it is time to figure out what would be needed and for how long it would be needed if you were to die. A good rule of thumb is to settle on the amount of debt you currently have including your mortgage, credit card debt, etc. If you have any life insurance already in force consider this as well. Once you have come to a decision in this area it is wise to plan for enough coverage for about two-thirds of your wage for as many years as is needed. This would hopefully allow repayment of your mortgage and outstanding bills as well as investment monies. Life insurance should be a source of comfort for you and your family.