Who Needs To Purchase Life Insurance?

By Author: nicksmith
Total Articles: 993
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The easiest answer to this question is to simply suggest we all need life insurance. However, in reality we probably fit in to one of two categories; the group where cover is absolutely vital and another where there is no real consequence whether life insurance is held or not.

What is life insurance about anyway?

Life insurance pays out a pre-determined amount to the nominated beneficiary if the person insured were to die while the insurance is valid. In many instances the insurance will also pay out on the diagnosis of a terminal illness where life expectancy is minimal. Within some possible restrictions the level of cover purchased can be any amount.

Why do people general purchase life insurance?

There are two main reasons. Firstly, so any debt, for example a mortgage, can be repaid following death. This allows the remaining partner / family to live in a mortgage free home. The second reason is to ensure that any remaining partner or dependents are provided with the financial means to care for themselves in the future.

Who do we think life insurance is a vital purchase for?

Given ...
... the main reason people purchase life insurance is to clear debt or provide financial support for their family the people who fit into the family or mortgage holding categories are obvious candidates for this type of insurance.

If you have a partner or dependent children then your passing may have major financial consequences. In many instances there will be reduced income or new child care costs. Think about how your family would cope financially if you and your income were no longer available.

Those with debt, especially a mortgage, should also consider life insurance. To leave a mortgage free home to your partner or dependents will remove huge levels of stress for the future.

How much life insurance should you have?

There are all sorts of theories but we prefer to keep it simple. At an absolute minimum you should insure for an amount that covers all your debt (mortgage, car loans, credit cards etc) and a further lump sum that will ensure your partner or dependents are financially secure for at least the short/medium term. This extra lump sum could depend on the ages of your children ie the younger they are the longer they need support or whether a partner may still be working in the future etc.

However we also believe that affordability is important. There is no point having a level of cover that you cannot afford to pay in the long term, especially when in many instances premiums will increase each year due to your age.

Who is in the group that maybe does not need insurance?

If you are single with no dependents (or have a working partner) or have no debt there is a question mark against why you would need life insurance. Who would you leave it to and why? The only point to remember though is that while you may not need cover now you may in the future and the best time to buy insurance is when you are young and healthy.

The elderly is another group who maybe no longer need insurance, if you have family in their 40’s or older and you have no debt then maybe it is time to stop paying huge insurance premiums and use it on your own quality of life.

For more information about Life Insurance Quotes, please visit www.insurancehelpline.co.nz