If you have a partner or children who rely on your income to meet large expenses such as a mortgage, life insurance is an essential purchase.
If you currently have a mortgage or are considering buying a property with someone else, then it is important to think about the consequences if you were to die. How much difference would it make to your partner, family member or friend if they were left to pay the mortgage on their own?
Here we look at who should consider taking out life cover and explain how to work out how much cover you need.
So who needs it?
If you are the main income earner for your family and would like your mortgage to be paid off in full in the event of your death, you will need appropriate life insurance cover.
If you and your partner or co-mortgagee are dual income earners, you need to determine if one income would cover the mortgage and other bills. It is unlikely that the surviving person’s outgoings would decrease significantly without major lifestyle changes, so taking out appropriate life insurance for both of you probably makes sense.
Yet it is not only wage earners who require life insurance. If you are a stay at home parent, consider how your partner would care for the children and home if you were no longer around. If they could not afford to give up work, this would likely mean paying for childcare and help around the house.
How much do I need?
The question of how much life insurance to carry can be a daunting one. First think about what debts you would like to pay off and how much your family would need to meet their future financial needs. Then consider your partner’s salary, any investments you currently have, your super balance and any life insurance cover you currently own. The additional amount of life insurance you take out should plug the gap between the two.
The bottom line is if people rely on your income or unpaid work and you have a mortgage, you probably need life insurance. While thinking about what could happen if you were gone isn’t a pleasant task, making sure you have the right cover today could make a significant difference to your loved ones tomorrow.