How do I find out how much cover I need?
One of the most important things to consider when taking out any sort of insurance is the amount of cover you’ll need. If you under-insure, you could end up experiencing financial hardship if you need to make a claim. If you over-insure, it will make your premiums more expensive than they need to be. By working out exactly how much you need to maintain your lifestyle, you’ll have certainty that your future is secure.
To calculate the right amount of cover, here are some of the things you need to think about.
How much do I owe?
You’ll probably want your insurance to pay off any debt that you’re carrying. This includes mortgages, credit cards, hire purchases, personal loans and overdrafts. Make sure to include both the interest and principal amounts, and any penalty fees you might incur if you pay them off early.
What about additional costs?
In the event of a life insurance payout, you’ll also need to factor in funeral costs and any medical expenses that may have been incurred.
How much will it cost to maintain your lifestyle?
In the event your family no longer has access to your regular income, how much will they need to live on each month? How many years will they need to cover? Don’t just limit your figure to day-to-day expenses, but also remember to factor in things like inflation, future education costs for your children, property maintenance, the need to replace household appliances and cars as they age, and whether your family would like to take regular holidays.
What about savings?
The loss of an income could also mean you lose your ability to save, both for short-term goals and also for retirement. Make sure you allow for a sum that can be invested to provide a comfortable standard of living when you are no longer working.
That’s a lot of things to consider, which is why it’s a great idea to speak to an experienced financial adviser who can help you calculate your ideal amount of insurance cover. At OPM, we’ll work with you to make sure that all your bases are covered.