Purchasing the first life cover you come across can be similar to buying a pair of jeans at a glance without fitting them, only to find that they don't fit when you get home.
While you will be able to return the jeans, this can prove frustrating and disastrous when it comes to life cover. Here is what you need to know when it comes to knowing how much life insurance will be enough for you and your loved ones, so you will not be left financially exposed when it matters the most.
Assess your financial needs
There are life cover amounts that range from a minimum of R50,000 to R10 million or more in South Africa. The cover amount that will apply to you will be determined by a range of things such as:
Your financial situation
The underwriting process
The cost of your current lifestyle
These factors play a role in terms of how much life cover will be enough and affordable for you to maintain over the years. While it is possible to use a life insurance calculator to get an estimate, there are other factors you need to consider.
Think about what you want your policy to cover
The same way you would never buy a car without checking out its features and history is the same way you should go about getting life cover. Many people often get caught up in pricing, failing to assess the features that come with a policy.
A general rule of thumb when it comes to knowing how much life insurance you will need is looking at your current lifestyle and the loved ones you support. How much will they need to sustain their lifestyle for years after you have died will determine if a cover is enough. They can use the life cover payout for things such as:
Managing daily expenses
Paying off debt
Handling funeral expenses
Paying off the bond
Sustaining their current way of living
Managing medical bills
You can choose to specify what you would like to be done with your life insurance payout through a will to ensure that it gets used in a way that you see fit.
Calculating how much you need
Take your salary and multiply it by 180. Use the answer to subtract the value of your assets to find out the estimate of how much you should be insured for to make sure that you and your loved ones are adequate. You can also make use of our life insurance calculator to find out how much you will need.
Speaking to a financial advisor can also be useful when it comes to finding out how much you will need. Keep in mind that the higher the cover amount, the likely it is that your premiums will increase. The peace of mind that comes with knowing that you and your loved ones are financially covered is priceless.