Pay too much and you’ve lost out on savings or spending opportunities; pay too little and you might be left high and dry. How do you find the right balance?
In an ideal world, the impact of your death or long-term or serious illness should have no financial consequence as the appropriate policy pays out to cover the event.
For most of us, however, finding the balance between how much to insure and protect, versus saving the money that would have been paid in premiums is a difficult decision.
When assessing how much cover you require, the starting point is listing:
The key is to imagine is that the event happened yesterday, whether that be your sudden death or serious illness. How much capital would you need and how much income in order that you and your loved ones’ current aims and ambitions are met
A rule of thumb is to insure yourself on death for a capital sum of twenty times your current income if you have financial dependents. The thinking behind this is that by withdrawing 5% of the capital (hopefully by way of interest or growth) will provide for those left behind the same level of income as you were earining.
For serious or long-term illness, it’s about making sure the policy pays you a level of income or capital that will not only allow you to maintain your current lifestyle, but also to allow you the freedom from financial worries and thus allow you to recover more quickly. Nothing is more worrying than poor health, but financial anxieties come a close second. There is a limit to what you can do to influence your future health, but luckily there are many options for protecting you and your estate from financial loss.
Cheap and cheerful cover can be bought readily over the internet, but it is always worthwhile having a financial planner help you assess precisely what you need. If you would like to speak to an LGBT-friendly financial planner about this or any other financial matter, please enter your postcode under the map on your right to find an adviser near you.
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