Page 74 - Phonebox Magazine May 2011

This is a question that advisers are often asked and is not always easy to answer, not least because everyone's situation is different and, as such, their needs will differ to. A single person without any children may not need any cover at all in theory, although even in this situation life cover can be useful to cover the costs of dealing with your estate and in order to perhaps leave money to more distant relatives than a spouse and children.
Perhaps the greatest need for life cover is for those with a young family. For most couples, young children not only means that more funds would be required in the event of death but it also means that it may not be easy for the surviving parent to work due to child care issues. If the breadwinner of the family dies then there is an obvious and instant financial loss to the family. If the children's main carer dies the actual financial loss to the family may seem small but, in reality, the financial loss is high if you take into account the true financial cost of one parent staying at home and how much it would cost to replace that.
When deciding how much life cover is ‘enough’ it is the size of the required benefit that is all too often greatly
underestimated. Indeed, the value of someone's income is all too often underestimated. For example, those in a good pension scheme through work will often have ‘Death in Service’ cover of four times their salary. This sounds a good level of cover - someone earning £40,000 a year will see their beneficiaries receive £160,000. However, if someone died at age 35 on this salary, with a wife and two young children left behind, the lost earnings (without allowing for inflation) could be 30 years of the same salary i.e. £1.2m. In those terms, £160,000 does not seem quite as adequate.
It is also important to consider other areas of your finances. For instance, do you have any debt? In the above scenario, it is not much use having £160,000 if you have a mortgage of the same amount and no additional life cover. Yes, the surviving spouse will not have a mortgage but equally they mat not have anything to live on either.
Adequate Life Cover is absolutely essential for most families. Is the level of cover you have enough? If you are unsure and would like some professional advice, please contact us and remember initial meetings are always without cost. Please see our advert below.
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Finance Matters
How much Life Cover is enough?