Unfortunately this is a question that is extremely difficult to answer and there is no hard and fast rule, every situation and every family is different. One thing that is worth while noting is that in the event of an unexpected death it is often the case that no matter how much life insurance you have, it’s not enough.
When there is a death in the family the flow on effect is huge. There is the emotional cost which is incalculable. Then there is grief which will be on different levels for people close to the deceased depending on how close their relationship was. Finally there is the healing phase where the family adjusts to life without the missing family member.
How Having Life Insurance Can Make a Huge Difference
Life Insurance cannot help with the any of the above phases after the death of a family member – however it can make a huge difference. Having life insurance in place allows the family time to adjust without financial stress of pressure.
They don’t have to worry about the costs associated with a funeral or legal expenses. They can carry on paying the bills and the mortgage – all necessities that having a life insurance policy in place will protect.
Factors to Consider When Deciding How Much Life Insurance Is Needed
When it comes to deciding how much life insurance you and your family needs consider the following:
- Current debt (e.g. mortgage)
- Monthly living expenses (especially if the life insured brings income into the household)
- Future educational requirements for children
- Retirement funding
- Change in the family unit – e.g. would a nanny or housekeeper be needed
Once you have considered all of the above it is also a good idea to consider an additional cash buffer. This can be used for a variety of things – possibly an extended period away from work for a partner while they adjust and spend time with family members – this can take time.
A family holiday may also be a consideration, to allow family to spend time together away from their usual day to day routine which will be different now that a member of the family is gone.
Deciding on the right level of life insurance cover for your family is the first step. Once your insurance is in place it is crucial to review it regularly – life changes, your insurance should keep up.
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