Do you know how much life insurance cover you should have?
For adequate protection in the event of the death, you should have enough life cover to clear debts, and a further lump sum to invest, which will generate an income equal to the income lost. For example, £100,000 at a rate of 5% would generate an annual income of £5,000.
Life insurance calculation
Use this simple calculation to work out how much life cover you should have in place:
Take your gross income, then divide it by 5 and multiply it by 100 – this will give you the lump sum amount that you need to invest to generate an income equivalent to the income lost.
Next, work out your total debt, including amount owed on mortgages and loans. Add this to the above figure to get the total amount of life cover you require.
Click here to ask us more about insurance with an Insurance Enquiry or call 0800 678 5929
Joint or single life policies?
In the case of a couple, we always recommend that you have 2 single life policies. This is a very cost effective manner to ensure that, if both partners were to die, a larger lump sum would form part of your estate. The effective use of writing policies ‘in trust’ will ensure that funds will pass to the beneficiaries of your life policies with no tax liability, and avoid time delays while your solicitor establishes probate on your estate. We also recommend single life policies so that the remaining partner will still be covered if the first partner were to die.
Writing life policies in trust
When putting life assurance in place, setting policies in trust is a very valuable tool in your strategy to protect your family.
Find out more about writing life insurance in trust or call 0800 678 5929
When clients have a young family, we advise that if the worst were to happen and both Client were to die at the same time, the payout amount from both policies, be used to generate an income to financially help those who would care for your family. For example, if both clients were to die and £300,000 was paid out each in trust. This total trust of £600,000 would generate at a rate of 5% an income of £30,000 to help financially the friend or family member that would care for your children, ensuring that those responsible will not suffer financially.
Please also remember that any protection benefits you have as an employee will be forfeited, if you move to another employer. It is therefore our opinion that, if financially possible, these benefits be regarded as a bonus.
